DOMINICKS SUPERMARKETS INC, S-1/A, 1996-10-07

DOMINICKS SUPERMARKETS INC
S-1/A, 1996-10-07
GROCERY STORES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 7, 1996

REGISTRATION NO. 333-11177

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 1 TO

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

DOMINICK'S SUPERMARKETS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 5411 94-3220603
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
</TABLE>

505 RAILROAD AVENUE
NORTHLAKE, ILLINOIS 60164
(708) 562-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

------------------------

THOMAS D. ROTI, ESQ.
GENERAL COUNSEL
DOMINICK'S SUPERMARKETS, INC.
505 RAILROAD AVENUE
NORTHLAKE, ILLINOIS 60164
(708) 562-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

------------------------

COPIES TO:

THOMAS C. SADLER, ESQ.
LATHAM & WATKINS
633 WEST FIFTH STREET
LOS ANGELES, CALIFORNIA 90071
(213) 485-1234
MICHAEL A. BECKER, ESQ.
CAHILL GORDON & REINDEL
80 PINE STREET
NEW YORK, NEW YORK 10005
(212) 701-3000

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------

CALCULATION OF REGISTRATION FEE
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<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
PROPOSED
TITLE OF EACH MAXIMUM AMOUNT OF
CLASS OF SECURITIES AGGREGATE REGISTRATION
TO BE REGISTERED OFFERING PRICE(1)(2) FEE(3)
- ----------------------------------------------------------------------------------------------------
Common Stock, par value $.01.............................. $132,480,000 $40,146
</TABLE>

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(1) Includes an amount relating to shares that the Underwriters have the option
to purchase to cover over-allotments, if any.

(2) Estimated solely for purposes of computing the registration fee pursuant to
Rule 457(o) under the Securities Act of 1933.

(3) Previously paid in connection with the original filing of the Registration
Statement on August 30, 1996.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED OCTOBER 7, 1996

PROSPECTUS
, 1996

6,400,000 SHARES

LOGO

DOMINICK'S SUPERMARKETS, INC.

COMMON STOCK

Of the 6,400,000 shares of common stock (the "Common Stock") offered hereby
(the "Offering"), 5,900,000 shares are being sold by Dominick's Supermarkets,
Inc. (the "Company") and 500,000 shares are being sold by certain of the
Company's stockholders (the "Selling Stockholders"). See "Principal and Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholders.

Prior to this Offering, there has been no public market for the Common
Stock. It is currently anticipated that the initial public offering price of the
Common Stock will be between $16.00 and $18.00 per share. See "Underwriting" for
information relating to the factors considered in determining the initial public
offering price.

The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "DFF," subject to official notice of issuance.

SEE "RISK FACTORS" COMMENCING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Per Share.................... $ $ $ $
Total (3).................... $ $ $ $
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</TABLE>

(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.

(2) Before deducting expenses payable by the Company estimated at $ .

(3) The Selling Stockholders have granted to the Underwriters a 30-day option to
purchase up to 960,000 additional shares of Common Stock at the Price to the
Public less Underwriting Discounts and Commissions, solely to cover
over-allotments, if any. If the Underwriters exercise this option in full,
the total Price to the Public, Underwriting Discounts and Commissions,
Proceeds to the Company and Proceeds to Selling Stockholders will be
$ , $ , $ and $ , respectively. See
"Underwriting."

The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters and subject to various prior conditions, including their right to
reject orders in whole or in part. It is expected that delivery of the shares of
Common Stock will be made in New York, New York on or about , 1996.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO.
INCORPORATED
BT SECURITIES CORPORATION

CHASE SECURITIES, INC.
<PAGE> 3

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL ON THE NEW YORK
STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. For purposes of this Prospectus, unless the context otherwise
requires, the "Company" refers to Dominick's Supermarkets, Inc. and its
consolidated subsidiaries, including its principal operating subsidiary,
Dominick's Finer Foods, Inc. ("Dominick's"). All references to fiscal years in
this Prospectus refer to the fiscal year ending on the Saturday closest to
October 31st of the year indicated (fiscal 1995 refers to the combined fiscal
periods of the Company and its predecessor for the 52 weeks ended October 28,
1995). The Company's fiscal year generally consists of three 12-week quarters
and a 16-week third quarter. All references to market share and demographic data
in this Prospectus are based upon industry publications and, unless otherwise
indicated, all references to numbers of stores are as of August 3, 1996. Unless
otherwise indicated, all information in this Prospectus (i) assumes that the
over-allotment option granted to the Underwriters is not exercised and (ii) has
been adjusted to reflect a 14.638-for-one stock split of the Company's common
stock which was effected prior to the date of this Prospectus.

THE COMPANY

The Company has increased its market share among Chicago-area supermarkets
from 19.0% in 1989 to 25.4% in 1995. With the exception of Jewel Food Stores,
which had a 35.6% market share in 1995, no other supermarket operator in the
Chicago area has more than a 5% market share. The Chicago metropolitan area is
the nation's third largest Metropolitan Statistical Area with a reported
population of approximately 7.7 million people, approximately 2.8 million
households and a stable and diverse economic base which includes major
manufacturing, transportation, finance and other business centers. According to
the U.S. Bureau of the Census, the population of suburban Chicago, where nearly
80% of the Company's stores are located, has grown by approximately 12% since
1986. According to a recent report issued by the U.S. Department of Commerce, by
the year 2005 the Chicago area is also expected to have a population of 8.3
million residents and the largest increase in jobs of all of the nation's major
metropolitan areas. The Company believes that its existing market share and its
plans to add new stores will allow it to benefit from the continuing growth of
the Chicago area.

DOMINICK'S. The Company's Dominick's stores are full-service supermarkets
that emphasize quality, freshness and service. The Company classifies its
Dominick's stores into three categories:

Conventional Supermarkets. Dominick's 24 conventional supermarkets are
typically located in higher density population areas and average
approximately 43,400 square feet in size (including approximately 29,100
square feet of selling space). All of the Company's conventional
supermarkets include a variety of service departments typically found in
full-service supermarkets such as delicatessen, bakery, meat and seafood
departments, and a limited selection of health and beauty care products.
Many stores also feature salad bars, prepared foods, floral departments,
film processing and liquor.

Combination Food and Drug Stores. Dominick's 38 combination food and
drug stores average approximately 57,600 square feet in size (including
approximately 40,300 square feet of selling space). The combination food
and drug stores offer all products and services typically found in a
conventional supermarket and, by virtue of their large size, include a
full-service drug store complete with a pharmacy, a broader line of health
and beauty care products and an expanded selection of seasonal merchandise.

3
<PAGE> 5

Fresh Stores. Dominick's 18 Fresh Stores are enhanced combination food
and drug stores designed to create a European-style fresh market atmosphere
and emphasize the store's visual appeal and quality merchandise perception.
The Company's Fresh Stores feature significant upgrades in store design and
fixtures and offer an expanded assortment of high quality fresh produce and
other perishables, a large selection of restaurant-quality prepared foods
for carry-out and in-store dining and a superior line of freshly baked
goods and pastry items. Fresh Stores also typically offer expanded
delicatessen, bakery, meat, seafood and floral departments and additional
service departments such as a gourmet coffee cafe. The first Fresh Store
was introduced in 1993 through the conversion of an existing conventional
supermarket. A total of 14 stores have been converted to date, resulting in
an average increase in customer counts, sales per square foot and store
contribution margins for the converted stores over pre-conversion levels.
In addition to the 14 Fresh Stores converted, four new Fresh Stores have
been opened, and an estimated 20 additional Fresh Stores are expected to be
opened or converted by the end of fiscal 1998. Converted Fresh Stores
average approximately 53,000 square feet in size (including approximately
39,300 square feet of selling space) while new Fresh Stores are expected to
average approximately 70,000 square feet (including approximately 55,000
square feet of selling space).

OMNI. The Company's 17 Omni stores are high-volume, price impact
combination food and drug stores emphasizing low prices and a broad selection of
products while offering less extensive service departments than traditional
full-service supermarkets. Omni stores average approximately 92,300 square feet
(including approximately 65,300 square feet of selling space). Omni stores offer
modified everyday low prices and compete effectively with warehouse formats and
other discount retailers in the Chicago area. Omni stores have an approximate
7.2% market share, giving Omni the third largest market share among Chicago-area
supermarkets on a stand-alone basis.

THE ACQUISITION. The Company was formed by The Yucaipa Companies
("Yucaipa") for the purpose of effecting the acquisition of Dominick's on March
22, 1995 (the "Acquisition"). Yucaipa is a private investment group specializing
in the acquisition and management of supermarket chains, and has investments in
and currently manages supermarket chains with total combined sales of
approximately $11 billion in their most recent fiscal years. Since the
Acquisition, the Company has increased its EBITDA margin for each fiscal
quarter, achieving a 5.4% margin in the 16-week period ended August 3, 1996 as
compared to 4.8% in the same period in fiscal 1995. Prior to the Acquisition,
Dominick's had been operated by Dominick DiMatteo, Jr., its founder, and his
family for approximately 70 years. The Company consummated the Acquisition for
an aggregate purchase price of approximately $692.9 million, including $124.5
million of assumed indebtedness (but excluding fees and expenses of $41.2
million). The principal sources of cash to finance the Acquisition were a $330
million senior credit facility (the "Old Credit Facility"), a $150 million
senior subordinated credit facility and $105 million of common equity financing
provided by Yucaipa and a group of institutional investors, including affiliates
of Apollo Advisors, L.P. ("Apollo"), and members of Dominick's management. In
connection with the Acquisition, Yucaipa entered into a consulting agreement
with the Company and received certain warrants. See "The Acquisition."

GROWTH AND OPERATING STRATEGY

The Company's senior managers have, on average, over 20 years of experience
in the food retailing industry. Management, in conjunction with Yucaipa, has
formulated a strategic plan to increase sales and profitability consisting of
the following key elements:

ACCELERATE NEW STORE PROGRAM. From 1987 until 1993, the Company's store
development program was focused primarily on developing combination food and
drug stores or converting existing conventional Dominick's stores to the
combination format, closing underperforming stores and creating a critical mass
of Omni stores. From fiscal 1994 until the Acquisition, the Company's growth
plan was focused on the conversion of existing stores to the Fresh Store
concept. During that period, only one new store was opened. Since the
Acquisition, management and Yucaipa have developed a growth strategy designed to
emphasize the expansion of the Dominick's store format in areas currently
underserved by the Company. As part of this strategy, management undertook an
aggressive plan to identify and develop new store sites and has since opened
seven new Fresh Stores during the second half of fiscal 1996 and expects to open
one additional Fresh

4
<PAGE> 6

Store during the fourth quarter of fiscal 1996. In addition, management expects
to continue to grow the Company's store base by opening nine Fresh Stores and
one Omni store in fiscal 1997 and seven Fresh Stores and one Omni store in
fiscal 1998.

EXPAND DOMINICK'S FRESH STORE CONCEPT. The results of the Company's 14
Fresh Store conversions have been highly favorable and have resulted in an
average increase in estimated annualized sales of approximately 27% compared to
such stores prior to their conversion. It is currently anticipated that
substantially all of the Company's new Dominick's combination food and drug
stores will be Fresh Stores. A number of existing Dominick's conventional
supermarkets and combination food and drug stores will also be converted to
Fresh Stores over the next two years. In addition, certain elements of the Fresh
Store concept, including expanded produce and perishable departments, are
currently being incorporated into many of the remaining Dominick's stores as
part of the chain-wide emphasis on high quality perishables. The Company
believes that the expansion of its Fresh Store concept through the addition of
new stores and the conversion of existing stores should have a favorable impact
on the Company's growth in sales and profitability.

CONTINUE TO IMPROVE PROFIT MARGINS. At the time of the Acquisition,
management and Yucaipa identified areas of opportunity for operating
improvements which they believed would result in approximately $23 million of
annual cost reductions compared to pre-Acquisition levels. These included: (i)
purchasing improvements resulting in part from renegotiating vendor contracts
and coordinating its buying efforts with other Yucaipa-managed supermarket
chains, (ii) labor productivity improvements resulting from increased automation
of labor planning systems and changes in labor processes and procedures, (iii)
general and administrative expense and occupancy expense reductions and (iv)
other merchandising and buying improvements. The Company believes that, as of
the end of the third quarter of fiscal 1996, it had implemented operating
improvements which should provide, on an annualized basis, a level of cost
savings substantially equal to the $23 million estimated at the time of the
Acquisition. The Company believes that approximately $17 million of such cost
savings are reflected in its results of operations for the 52-week period ended
August 3, 1996. In addition, management has identified additional potential cost
savings and efficiencies, including an increase in the percentage of private
label sales, which it has begun to implement. The Company believes that these
cost savings, combined with the greater number of Fresh Stores, should result in
higher overall operating margins than the Company has experienced historically.

The Company was incorporated in Delaware in 1995 and its principal
executive offices are located at 505 Railroad Avenue, Northlake, Illinois 60164,
telephone (708) 562-1000.

RISK FACTORS

An investment in the Common Stock is subject to a number of material risks,
including risks related to the Company's operations and the industry in which it
competes. The Company's business, results of operations or financial position
may be adversely affected by, among other things, (i) the failure to generate
sufficient cash flow or other sources of liquidity to service its debt and fund
working capital and capital expenditure requirements, (ii) a prolonged labor
dispute with its employees, most of which are unionized and approximately half
of which are covered by a union contract that expired in July 1996, (iii) an
adverse outcome in a pending gender discrimination lawsuit or (iv) increased
competition or entry of new competitors into the supermarket industry in the
Company's market. For a more detailed discussion of these and certain other
risks, see "Risk Factors" beginning on page 9.

5
<PAGE> 7

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered:
By the Company......................... 5,900,000 shares
By the Selling Stockholders............ 500,000 shares(1)
------------
Total.......................... 6,400,000 shares(1)
------------
------------
Common Stock to be Outstanding After the
Offering............................... 21,359,035 shares(2)
Use of Proceeds.......................... Of the estimated net proceeds to the Company of
$92.7 million (based on an assumed initial public
offering price of $17.00 per share, the midpoint
of the estimated offering price range),
approximately $51.7 million will be used to
repurchase the Company's outstanding 15%
Redeemable Exchangeable Cumulative Preferred
Stock (the "Redeemable Preferred Stock");
approximately $30.5 million will be used,
together with approximately $45.0 million of
available cash and approximately $193.8 million
of borrowings under a new $325 million bank
credit facility (the "New Credit Facility"), to
repay all outstanding borrowings under Dominick's
Old Credit Facility, together with accrued
interest thereon; and approximately $10.5 million
will be used to terminate the Company's
obligations under its consulting agreement with
Yucaipa (see "Certain Transactions" for a
description of a new management agreement). The
Company will not receive any of the proceeds from
the sale of shares by the Selling Stockholders.
NYSE Symbol.............................. "DFF"
</TABLE>

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(1) Assumes no exercise of the Underwriters' over-allotment option.

(2) Does not include 966,835 shares of Common Stock issuable upon the exercise
of options granted pursuant to the Company's 1995 Stock Option Plan, or an
additional 1,000,000 shares of Common Stock reserved for future issuance
under the Company's 1996 Equity Participation Plan, or up to 3,874,492
shares of Common Stock issuable to Yucaipa upon exercise of the Yucaipa
Warrant (as defined herein). The Yucaipa Warrant may be exercised for cash
or on a cashless basis. The Yucaipa Warrant will become exercisable upon the
consummation of the Offering at an exercise price of $20.73 per share.
Pursuant to the cashless exercise provisions of the Yucaipa Warrant, upon
exercise in full Yucaipa would be entitled to receive a number of shares
equal to the difference between 3,874,492 shares and the number of shares
having an aggregate market value at the time of exercise of $80.3 million
(i.e., the aggregate exercise price). See "Management -- 1995 Stock Option
Plan" "-- 1996 Equity Participation Plan" and "Description of Capital
Stock -- Yucaipa Warrant." The total number of shares of Common Stock
outstanding after the Offering includes shares issuable upon the conversion
of all outstanding shares of non-voting Class B Common Stock (the "Class B
Common Stock") which are convertible into Common Stock on a one-for-one
basis at the option of the holder, subject to certain restrictions. See
"Description of Capital Stock -- Class B Common Stock."

6
<PAGE> 8

SUMMARY FINANCIAL INFORMATION AND OTHER DATA

The following summary financial information and other data should be read
in conjunction with the historical financial statements, the pro forma financial
statements and the related notes thereto included elsewhere in this Prospectus.
For purposes of the financial presentation below, the "Predecessor Company"
refers to Dominick's prior to the consummation of the Acquisition on March 22,
1995. The pro forma information set forth below gives effect to the Acquisition
and certain related events as though they had occurred on October 30, 1994. See
the Unaudited Pro Forma Financial Statements commencing on page P-1 of this
Prospectus.

<TABLE>
<CAPTION>
COMPANY
PREDECESSOR COMPANY ---------------------------------------------------
--------------------------
PRO FORMA LTM PRO FORMA
52 WEEKS ENDED 52 WEEKS 52 WEEKS 40 WEEKS 40 WEEKS
-------------------------- ENDED ENDED ENDED ENDED
OCTOBER 30, OCTOBER 29, OCTOBER 28, AUGUST 3, AUGUST 5, AUGUST 3,
1993 1994 1995 1996(A) 1995 1996
----------- ----------- ----------- --------- ---------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA AND STORE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Sales................................ $ 2,330.2 $ 2,409.9 $ 2,433.8 $2,445.2 $1,889.1 $1,900.6
Gross profit......................... 515.2 538.4 552.1 564.7 423.7 437.0
Selling, general and administrative
expenses........................... 469.4 484.3 482.2 481.0 374.9 372.3
Operating income..................... 45.8 54.1 69.9 83.7 48.8 64.7
Interest expense..................... 34.1 30.0 72.4 73.2 56.1 53.4
Net income (loss)(b)................. $ 7.6 $ 7.5 (10.6) 1.8 (12.6) 3.1
Preferred stock accretion............ 6.3 6.7 4.8 5.2
Net loss available to common
stockholders....................... $ (16.9) $ (4.9 ) $ (17.4) $ (2.1 )
SELECTED OPERATING DATA, AS ADJUSTED
FOR THE OFFERING(C):
Interest expense..................... 58.6 61.3 45.4 44.0
Net income (loss).................... (2.3) 8.9 (6.2) 8.7
Income (loss) per common share(d).... $ (0.11) $ 0.42 $ (0.29) $ 0.41
Weighted average common and common
equivalent shares outstanding (in
millions)(d)....................... 21.3 21.4 21.3 21.4
OTHER FINANCIAL DATA:
Depreciation and amortization........ $ 51.1 $ 52.9 $ 41.3 $ 42.3 $ 35.6 $ 34.7
Capital expenditures................. 31.1 60.1 45.5 28.8 31.9 25.3
EBITDA (as adjusted)(e).............. 98.3 112.0 114.9 128.5 87.2 100.9
STORE DATA:
Fresh Store conversions.............. 0 6 8 1 7 0
Stores opened during period.......... 1 1 0 4 0 4
Stores closed during period.......... (1) (1) (4) (4 ) (4) (4 )
Stores open at end of period......... 101 101 97 97 97 97
Comparable store sales growth........ (1.6)% 2.9% 1.8% 1.2 % 2.0% 1.1 %
Average weekly sales per store (in
thousands)......................... $ 448 $ 466 $ 481 $ 489 $ 484 $ 494
Average sales per selling square
foot............................... $ 601 $ 610 $ 613 $ 614 $ 619 $ 619
Total selling square feet (at end of
period, in thousands).............. 3,969 4,039 4,008 4,074 3,984 4,074
</TABLE>

<TABLE>
<CAPTION>
AUGUST 3, 1996
---------------------------
OCTOBER 28, 1995 ACTUAL AS ADJUSTED(F)
---------------- -------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital deficit............................................ $ (34.2) $ (6.0) $ (49.3)
Total assets....................................................... 1,100.2 1,094.9 1,041.7
Total debt......................................................... 599.4 604.7 528.9
Redeemable preferred stock......................................... 43.7 49.0 --
Stockholders' equity............................................... 96.2 94.1 174.0
</TABLE>

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<PAGE> 9

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(a) Information for the "latest twelve months" presents the historical results
of operations of the Company for the four most recent fiscal quarters in
order to provide a full year of post-Acquisition operating results.

(b) Net income (loss) for the 52 weeks ended October 29, 1994 reflects an
extraordinary loss of $6.3 million, net of applicable income tax benefit of
$3.9 million, resulting from the retirement of $60 million principal amount
of Dominick's 11.78% Senior Notes.

(c) Selected operating data, as adjusted for the Offering, reflects the
consummation of the sale of the Common Stock offered hereby and the
application of the estimated net proceeds therefrom, as well as certain
related transactions described under "Use of Proceeds," as if such
transactions had occurred at the beginning of the applicable period. Such
adjusted operating data does not reflect an anticipated charge to earnings
associated with the termination of the existing consulting agreement and the
anticipated write-off of deferred debt issuance costs in connection with the
refinancing of the Old Credit Facility. See footnote (e) below.

(d) Income (loss) per common share, as adjusted for the Offering, is computed
based upon the weighted average number of shares of common stock outstanding
during the period and gives effect to the issuance of the shares of Common
Stock being offered hereby by the Company. In accordance with the rules of
the Securities and Exchange Commission, 85,998 shares of common stock issued
after March 21, 1995 and 29,499 equivalent shares using the treasury stock
method for outstanding stock options granted after March 21, 1995 have been
treated as outstanding for all subsequent periods in calculating earnings
per share because such shares were issued and such options are exercisable
at prices below the assumed initial public offering price.

(e) EBITDA (as adjusted) represents income (loss) before interest expense,
income taxes, depreciation and amortization, seller transaction expenses,
SARs expenses and termination costs, net equipment write-offs related to
closed stores and remodels, LIFO charge, restructuring charges,
extraordinary loss on extinguishment of debt and cumulative effect of
accounting change. The Company believes that EBITDA (as adjusted) provides
meaningful information regarding the Company's ability to service debt by
eliminating certain non-cash and unusual charges. However, EBITDA (as
adjusted) should not be construed as an alternative to operating income, net
income or cash flow from operating activities (as determined in accordance
with generally accepted accounting principles) and should not be construed
as an indication of the Company's operating performance or as a measure of
liquidity. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

(f) As adjusted to give effect to the issuance of the Common Stock offered
hereby and the application of the net proceeds therefrom, together with the
anticipated utilization of existing cash and borrowings under the New Credit
Facility. See "Use of Proceeds." Stockholders' equity is adjusted to reflect
an anticipated charge to earnings of $6.3 million (net of applicable income
tax benefit of $4.2 million) associated with the termination of the existing
consulting agreement and an anticipated extraordinary loss resulting from
the write-off of approximately $6.4 million (net of applicable income tax
benefit of $4.2 million) of deferred financing costs in connection with the
repayment of the Old Credit Facility.

8
<PAGE> 10

RISK FACTORS

Prospective investors should carefully consider the following factors, in
addition to the other information contained in this Prospectus, in evaluating
the Company and its business before purchasing shares of the Common Stock
offered hereby.

LEVERAGE; POTENTIAL INABILITY TO SERVICE OR REFINANCE DEBT

At August 3, 1996, as adjusted to give effect to the Offering and the
application of the estimated net proceeds therefrom, the Company's consolidated
total indebtedness and total stockholders' equity would have been $528.9 million
and $174.0 million, respectively. See "Capitalization." In addition, the
Company's balance sheet at August 3, 1996 reflected goodwill of $422.7 million.
As of August 3, 1996, pro forma for the Offering and certain related
transactions, the Company would have had approximately $131 million available
for borrowing under the New Revolving Facilities (as defined). The Company's
ability to make scheduled payments of the principal of, or interest on, or to
refinance, its indebtedness and to make scheduled payments under its operating
leases depends on its future performance, which to a certain extent is subject
to economic, financial, competitive and other factors beyond its control. Based
upon the current level of operations, management believes that available cash
flow, together with available borrowings under the New Credit Facility and other
sources of liquidity, including proceeds from sale-leaseback transactions, will
be adequate to meet the Company's anticipated requirements for working capital,
capital expenditures, interest payments and scheduled principal payments under
the New Credit Facility and the Company's other indebtedness. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." There can be no assurance,
however, that the Company's business will continue to generate cash flow at or
above current levels or that anticipated growth will materialize. If the Company
is unable to meet its obligations from such sources, the Company may be required
to refinance all or a portion of its existing indebtedness, sell assets or
obtain additional financing. There can be no assurance that any such refinancing
would be possible or that any such sales of assets or additional financing could
be completed.

LABOR RELATIONS; EXPIRED UNION CONTRACTS

Approximately 91% of the Company's employees are unionized. The Company's
principal union contracts with the Dominick's retail clerks and the Omni
meatcutters which cover approximately 53% and 3% of the Company's employees,
respectively, expired in July 1996 and no new agreements have been reached. The
Company and the respective unions representing such employees are negotiating
the terms of new contracts. While the Company believes that its relations with
its employees are good, a prolonged labor dispute (which could include a work
stoppage) would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Employees and
Labor Relations."

POTENTIAL ADVERSE EFFECTS OF PENDING LITIGATION

On March 16, 1995, a lawsuit was filed in the United States District Court
for the Northern District of Illinois against Dominick's by two employees of
Dominick's. The plaintiff's original complaint asserted allegations of gender
discrimination and sought compensatory and punitive damages in an unspecified
amount. The plaintiffs filed an amended complaint on May 1, 1995. The amended
complaint added four additional plaintiffs and asserted allegations of gender
and national origin discrimination. The plaintiffs filed a second amended
complaint on August 16, 1996 adding three additional plaintiffs. There are
currently several outstanding motions before the court, including the
plaintiffs' motion for class certification. The parties are conducting discovery
with respect to the pending motion for class certification. The Company plans to
vigorously defend this lawsuit. Due to the numerous legal and factual issues
which must be resolved during the course of this litigation, the Company is
unable to predict the ultimate outcome of this lawsuit. If Dominick's were held
liable for the alleged discrimination (or otherwise concludes that it is in the
Company's best interest to settle the matter), it could be required to pay
monetary damages (or settlement payments) which, depending on the outcome of the
class certification motion (and the size of any class certified), the theory of
recovery or the resolution of the plaintiffs' claims for compensatory and
punitive damages, could be substantial and could have a material adverse effect
on the Company. See "Business -- Legal Proceedings."

9
<PAGE> 11

HIGHLY COMPETITIVE INDUSTRY

The supermarket industry is highly competitive and characterized by narrow
profit margins. The Company's competitors include national and regional
supermarket chains, independent and specialty grocers, drug and convenience
stores, warehouse club stores, deep discount drug stores and supercenters.
Supermarket chains generally compete on the basis of location, quality of
products, service, price, product variety and store condition. The Company
regularly monitors its competitors' prices and adjusts its prices and marketing
strategy as management deems appropriate in light of existing conditions. There
can be no assurance that new competitors will not enter the supermarket industry
or that the Company can maintain its current market share. See "Business --
Competition."

EXPOSURE TO REGIONAL ECONOMIC TRENDS DUE TO THE COMPANY'S GEOGRAPHIC
CONCENTRATION

All of the Company's stores are located in the greater Chicago metropolitan
area and thus the performance of the Company will be particularly influenced by
developments in this area. A significant economic downturn in the Chicago
metropolitan area could have a material adverse effect on the Company's
business, financial condition or results of operations.

LIMITATIONS ON ACCESS TO CASH FLOW OF DOMINICK'S

The Company is a holding company which conducts its business through its
wholly owned subsidiary, Dominick's, and its subsidiaries. Under the terms of
the New Credit Facility, the indenture governing its 10 7/8% Senior Subordinated
Notes due 2005 (the "Note Indenture") and the other instruments governing its
indebtedness, Dominick's is restricted in its ability to pay dividends or
otherwise distribute cash to the Company. See "Description of Certain
Indebtedness."

COST OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS

The Company is subject to federal, state and local laws, regulations and
ordinances that (i) govern activities or operations that may have adverse
environmental effects, such as discharges to air and water, as well as handling
and disposal practices for solid and hazardous wastes and (ii) impose liability
for the costs of cleaning up, and certain damages resulting from, sites of past
spills, disposals or other releases of hazardous materials (together,
"Environmental Laws"). From time to time, operations of the Company have
resulted or may result in noncompliance with or liability for cleanup pursuant
to Environmental Laws. However, the Company believes that any such noncompliance
or liability under current Environmental Laws would not have a material adverse
effect on its business, financial condition or results of operations. See
"Business -- Environmental Matters."

CONTROL BY MAJOR STOCKHOLDERS

Upon consummation of the Offering, certain affiliates of Yucaipa and Apollo
will have beneficial ownership of approximately 13.8% and 27.4%, respectively,
of the outstanding Common Stock (assuming, with respect to Apollo, the
conversion of 2,455,224 shares of Class B Common Stock into Common Stock).
Pursuant to a stockholders' agreement (the "Stockholders Agreement") entered
into by such affiliates of Yucaipa and Apollo and certain other stockholders of
the Company, Yucaipa and Apollo have the right to nominate six and three
directors, respectively, to the boards of directors of the Company and
Dominick's and are required to vote their respective shares of Common Stock to
elect the directors nominated by the other party as well as for the two
independent directors who will be appointed to the boards following the
consummation of this Offering. Yucaipa's right to nominate members to such
boards of directors will be reduced by three if Ronald W. Burkle, the
controlling general partner of Yucaipa, ceases for any reason to beneficially
own at least 33 1/3% of the shares beneficially owned by Yucaipa on the date of
the Acquisition and shall terminate if Mr. Burkle ceases for any reason
(including death) to beneficially own at least 25% of the shares beneficially
owned by Yucaipa on such date. As a result of the ownership structure of the
Company and the contractual commitments described above, the voting and
management control of the Company is highly concentrated. As a result of its
ability to nominate a majority of the members of the board of directors, Yucaipa
has the ability to direct the actions of the Company with respect to matters
such as the payment of dividends,

10
<PAGE> 12

material acquisitions and dispositions and other extraordinary corporate
transactions. Concurrently with the consummation of the Offering, Yucaipa will
enter into a new management agreement with the Company and Dominick's, pursuant
to which Yucaipa will render certain management and advisory services to the
Company and Dominick's and will receive fees for such services. Yucaipa will
also receive a payment in connection with the termination of an existing
consulting agreement. See "Certain Transactions," "Principal and Selling
Stockholders" and "Description of Capital Stock."

DEPENDENCE UPON KEY PERSONNEL

The Company's success depends, in part, upon the services of Ronald W.
Burkle, the Company's Chairman, and Robert A. Mariano, the Company's President
and Chief Executive Officer, and other key personnel. The loss of the services
of Mr. Burkle, Mr. Mariano or other key management personnel could have an
adverse effect upon the Company's business, results of operations or financial
condition. The Company has entered into employment agreements with Mr. Mariano
and certain of its other key management personnel. For a description of the
terms of such agreements, see "Management -- Employment Agreements." There can
be no assurance that the Company will be able to retain its existing management
personnel.

POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S
CERTIFICATE OF INCORPORATION AND BYLAWS

The Company's Amended and Restated Certificate of Incorporation and Bylaws
contain provisions that could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from attempting to
acquire, control of the Company. These provisions, among other things, establish
certain advance notice procedures for nominating candidates for election as
directors and for stockholder proposals to be considered at stockholders'
meetings and provide that only the Board of Directors, the Chief Executive
Officer of the Company or the holders of a majority of the outstanding Common
Stock may call special meetings of the stockholders. In accordance with the
terms of the Company's Amended and Restated Certificate of Incorporation,
effective upon the consummation of the Offering, the terms of office of the
Board of Directors will be divided into three classes serving staggered
three-year terms. The Company's Amended and Restated Certificate of
Incorporation also provides that the authorized number of directors may be
changed only by resolution of the Board of Directors and, although directors of
the Company may be removed for cause by the affirmative vote of the holders of a
majority of the Common Stock, the Company's Amended and Restated Certificate of
Incorporation provides that holders of 66 2/3% of the Common Stock must vote to
approve the removal of a director without cause. In addition, the Company's
Amended and Restated Certificate of Incorporation authorizes the Board of
Directors to issue Preferred Stock (as defined) without stockholder approval and
upon such terms as the Board of Directors may determine. While no shares of
Preferred Stock will be outstanding upon the repurchase of the Redeemable
Preferred Stock following the consummation of the Offering and the Company has
no present plans to issue any shares of Preferred Stock, the rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of any holders of Preferred Stock that may be issued in the future.
See "Description of Capital Stock."

NO PRIOR MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market will develop
or be sustained after the Offering. The initial public offering price will be
determined by negotiations between the Company and the Representatives (as
defined), and there can be no assurance that the market price of the Common
Stock after the Offering will equal or exceed the initial public offering price.
See "Underwriting" for information relating to the factors considered in
determining the initial public offering price of the Common Stock. Following the
consummation of the Offering, the market price of the Common Stock could be
subject to significant fluctuations in response to variations in results of
operations, general economic and market conditions and other factors.

11
<PAGE> 13

SUBSTANTIAL DILUTION

Purchasers of Common Stock offered hereby will experience substantial
dilution of $30.41 per share in pro forma net tangible book value per share of
Common Stock from the initial public offering price. See "Dilution."

SHARES ELIGIBLE FOR FUTURE SALE

There will be an aggregate of 21,359,035 shares of Common Stock and Class B
Common Stock outstanding immediately following consummation of the Offering. The
6,400,000 shares of Common Stock offered hereby will be freely tradeable without
restriction or registration under the Securities Act by persons other than
"affiliates," as defined in the Securities Act of 1933, as amended (the
"Securities Act"), of the Company. The remaining 14,959,035 shares of
outstanding Common Stock and Class B Common Stock are "restricted securities"
under the Securities Act and may only be sold pursuant to an effective
registration statement under the Securities Act or an applicable exemption from
the registration requirements of the Securities Act, including Rule 144
thereunder. Holders of 14,525,411 such shares of Common Stock and Class B Common
Stock have certain registration rights. In connection with this Offering, all of
such holders of Common Stock and Class B Common Stock and all of the directors
and executive officers of the Company have agreed not to offer, sell, contract
to sell, grant any option to purchase or otherwise dispose of their shares of
Common Stock or Class B Common Stock of the Company or any securities
convertible into or exercisable or exchangeable for such Common Stock or Class B
Common Stock, or in any other manner transfer all or a portion of the economic
consequences associated with the ownership of such Common Stock or Class B
Common Stock, or to cause a registration statement covering any shares of Common
Stock or Class B Common Stock to be filed, for a period of 180 days after the
date of this Prospectus without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation. See "Shares Eligible for Future Sale." Upon the
expiration of such lock-up period, there will be 14,525,411 shares of Common
Stock (including Common Stock issuable upon conversion of the Class B Common
Stock, but excluding shares issuable upon exercise of the Yucaipa Warrant or any
employee stock options) eligible for sale subject to certain volume and other
limitations of Rule 144 under the Securities Act. See "Description of Capital
Stock -- Yucaipa Warrant." No prediction can be made as to the effect, if any,
that future sales of shares of Common Stock or the availability of shares for
future sale will have on the market price of shares of Common Stock prevailing
from time to time. Sales of substantial amounts of Common Stock (including
shares issuable upon the exercise of stock options), or the perception that such
sales could occur, could adversely affect prevailing market prices for the

Common Stock.

12
<PAGE> 14

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Stock offered
hereby (after deducting underwriting discounts and estimated expenses of the
Offering) are estimated to be approximately $92.7 million, assuming an initial
public offering price of $17.00 per share (the midpoint of the estimated
offering price range). The actual net proceeds will vary if the actual initial
public offering price or the estimated expenses are different. The Company will
not receive any of the proceeds from the sale of shares by the Selling
Stockholders.

The Company will use approximately $51.7 million of the estimated net
proceeds to repurchase all of the Company's outstanding Redeemable Preferred
Stock. Approximately $30.5 million of net proceeds, together with approximately
$45.0 million of available cash and approximately $193.8 million of borrowings
under the New Credit Facility, will be used to repay all outstanding borrowings
under the Old Credit Facility, together with accrued interest thereon. The
remaining $10.5 million of such estimated net proceeds will be used to terminate
the Company's obligations under its existing consulting agreement with Yucaipa.
The New Credit Facility will provide the Company with additional working capital
availability to support, among other things, its strategy to build new stores
and to continue remodeling existing stores. Borrowings under the Old Credit
Facility were used to fund a portion of the purchase price in the Acquisition.
Portions of the Old Credit Facility mature annually on March 31 of 2001, 2002
and 2003 and a portion matures on September 30, 2003. For the 40 weeks ended
August 3, 1996, the borrowings under the Old Credit Facility had an average
blended interest rate of 9.0%. Pursuant to an agreement with the holders of the
Redeemable Preferred Stock, the Company will repurchase such shares on January
2, 1997. Pending application of the net proceeds for the purposes specified
above, they will be invested in short-term, interest-bearing obligations or be
used to temporarily reduce borrowings under the New Revolving Facilities (as
defined).

DIVIDEND POLICY

The Company anticipates that all earnings in the foreseeable future will be
retained to finance the continuing development of its business and that it will
not pay any dividends in the foreseeable future. The payment of any future
dividends will be at the discretion of the Company's Board of Directors and will
depend upon, among other things, future earnings, the success of the Company's
business activities, capital requirements, the general financial condition of
the Company and general business conditions. The New Credit Facility will
restrict the ability of the Company to pay dividends and the New Credit Facility
and the Note Indenture will restrict the ability of Dominick's to pay dividends
or otherwise distribute cash to the Company. See "Description of Certain
Indebtedness."

13
<PAGE> 15

DILUTION

At August 3, 1996, the Company had a deficit in net tangible book value of
$374.5 million, or $24.24 per share of Common Stock and Class B Common Stock.
Net tangible book value per share is equal to the Company's total tangible
assets less its total liabilities, divided by the total number of outstanding
shares of Common Stock and Class B Common Stock. After giving effect to the sale
of 6,400,000 shares of Common Stock offered hereby at an assumed initial public
offering price of $17.00 per share (the midpoint of the estimated offering price
range) and the receipt and application of the estimated net proceeds therefrom,
the pro forma deficit in net tangible book value of the Company at August 3,
1996 would have been $286.3 million, or $13.41 per share. This represents an
immediate decrease in the deficit in net tangible book value of $10.83 per share
to the existing stockholders and an immediate dilution of $30.41 per share to
new stockholders purchasing shares in the Offering. The following table
illustrates this dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.......... $ 17.00
Deficit in net tangible book value per share before the
Offering............................................ $(24.24)
Decrease in deficit in net tangible book value per
share attributable to new stockholders.............. 10.83
Pro forma deficit in net tangible book value per share
after the Offering..................................... (13.41)
Dilution per share to new stockholders................... $ 30.41
=======
</TABLE>

The following table summarizes (as of August 3, 1996) the differences
between the existing stockholders and the new stockholders with respect to the
number of shares of Common Stock offered hereby, the total consideration paid to
the Company and the average price paid per share (assuming an initial public
offering price of $17.00 per share).

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ------------------------ PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)............. 15,446,967 72.4% $105,552,000 51.3% $ 6.83
New stockholders(1).................. 5,900,000 27.6 100,300,000 48.7 17.00
---------- ----- ------------ -----
Total...................... 21,346,967 100.0% $205,852,000 100.0%
========== ===== ============ =====
</TABLE>

The calculations in the tables set forth above (i) assume no exercise of
the Underwriters' over-allotment option, (ii) do not reflect a total of 966,835
shares issuable upon the exercise of options granted pursuant to the Company's
1995 Stock Option Plan or an additional 1,000,000 shares reserved for issuance
pursuant to the 1996 Equity Participation Plan or any shares issuable upon
exercise of the Yucaipa Warrant and (iii) do not reflect the issuance of 14,996
shares of Common Stock subsequent to August 3, 1996.

- ---------------

(1) Sales by Selling Stockholders in the Offering will reduce the number of
shares held by existing stockholders to 14,946,967 or approximately 70.0%
(13,986,967 shares or approximately 65.5% if the Underwriters'
over-allotment option is exercised in full) and will increase the number of
shares to be purchased by new stockholders to 6,400,000 or approximately
30.0% (7,360,000 shares or approximately 34.5% if the Underwriters'
over-allotment option is exercised in full) of the total number of shares of
Common Stock and Class B Common Stock outstanding after the Offering. See
"Principal and Selling Stockholders."

14
<PAGE> 16

CAPITALIZATION

The following table sets forth the unaudited consolidated cash and cash
equivalents, the current portion of long-term debt and the capitalization of the
Company at August 3, 1996, and as adjusted to give effect to the Offering and
the application of the net proceeds therefrom, together with the utilization of
existing cash and borrowings under the New Credit Facility to repay all
indebtedness under the Old Credit Facility. See "Use of Proceeds." This table
should be read in conjunction with the consolidated financial statements of the
Company and related notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AUGUST 3, 1996
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents............................................. $ 66.8 $ 21.8
======== ========
Current portion of long-term debt and capital lease obligations....... $ 9.8 $ 8.1
======== ========
Long-term debt:
New Credit Facility(a):
New Term Loan.................................................... $ -- $ 100.0
New Revolving Facilities......................................... -- 94.0
Old Credit Facility................................................. 268.1 --
Capital lease obligations........................................... 121.1 121.1
Mortgages, industrial revenue bonds and other....................... 5.7 5.7
Senior Subordinated Notes due 2005.................................. 200.0 200.0
-------- --------
Total long-term debt........................................ $ 594.9 $ 520.8
-------- --------
Redeemable Preferred Stock(b)......................................... 49.0 --
Stockholders' equity:
Common Stock, $.01 par value(c)..................................... 0.1 0.1
Class B Common Stock, $.01 par value................................ 0.1 0.1
Additional paid-in capital.......................................... 107.6 200.3
Retained earnings (deficit)(d)...................................... (13.8) (26.5)
-------- --------
Total stockholders' equity(d).................................... 94.0 174.0
-------- --------
Total capitalization........................................ $ 737.9 $ 694.8
======== ========
</TABLE>

- ------------------------------

(a) The New Credit Facility will provide a $100 million term loan (the "New Term
Loan"), a $105 million revolving term loan facility (the "New Revolving Term
Facility") and a $120 million revolving credit facility (the "New Revolving
Facility" and, together with the New Revolving Term Facility, the "New
Revolving Facilities") which will be available for working capital and
general corporate purposes. Up to $50 million of the New Revolving Facility
may be used to support commercial and standby letters of credit. The letters
of credit will be used to cover workers' compensation contingencies and for
other purposes permitted under the New Credit Facility. Letters of credit
for approximately $17.2 million were issued under the Old Credit Facility at
August 3, 1996. See "Description of Certain Indebtedness."

(b) Upon the repurchase of the Redeemable Preferred Stock, the Company will have
200,000 shares of Preferred Stock authorized, none of which will be issued
and outstanding. See "Use of Proceeds."

(c) Does not include 966,835 shares of Common Stock issuable upon the exercise
of options granted pursuant to the Company's 1995 Stock Option Plan, or an
additional 1,000,000 shares reserved for future issuance under the Company's
1996 Equity Participation Plan, or 3,874,492 shares of Common Stock issuable
to Yucaipa upon exercise of the Yucaipa Warrant. The Yucaipa Warrant will be
exercisable upon the consummation of this Offering at an exercise price of
$20.73 per share. The Yucaipa Warrant may be exercised for cash or on a
cashless basis. Pursuant to the cashless exercise provisions of the Yucaipa
Warrant, upon exercise in full Yucaipa would be entitled to receive a number
of shares equal to the difference between 3,874,492 shares and the number of
shares having an aggregate market value at the time of exercise of $80.3
million (i.e., the aggregate exercise price). See "Management -- 1995 Stock
Option Plan," "-- 1996 Equity Participation Plan" and "Description of
Capital Stock -- Yucaipa Warrant."

(d) Stockholders' equity, as adjusted, gives effect to an anticipated charge to
earnings of $6.3 million (net of applicable income tax benefit of $4.2
million) resulting from the termination of the existing consulting agreement
and an anticipated extraordinary loss of $6.4 million (net of applicable
income tax benefit of $4.2 million) resulting from the write-off of deferred
financing costs in connection with the repayment of the Old Credit Facility.

15
<PAGE> 17

SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

The following table sets forth selected historical financial data of the
Company as of and for the 52 weeks ended November 2, 1991, the 52 weeks ended
October 31, 1992, the 52 weeks ended October 30, 1993, the 52 weeks ended
October 29, 1994 and the 32 weeks ended October 28, 1995, which, together with
the operating and other financial data for the 20 weeks ended March 21, 1995,
have been derived from the financial statements audited by Ernst & Young LLP,
independent auditors. The selected historical balance sheet data as of March 21,
1995 and the selected historical financial data as of and for the 40 weeks ended
August 3, 1996 have been derived from unaudited interim consolidated financial
statements which, in the opinion of management, reflect all material
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of such data. The pro forma information set forth below for
the 52 weeks ended October 28, 1995 and the 40 weeks ended August 5, 1995 gives
effect to the Acquisition and certain related events as though they had occurred
on October 30, 1994. The following information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," the historical consolidated financial statements of the Company and
the Predecessor Company, together with the related notes thereto, and the
Unaudited Pro Forma Financial Statements included elsewhere in this Prospectus.

Dominick's was acquired by the Company on March 22, 1995. The historical
financial statements for the 20 weeks ended March 21, 1995 and all prior periods
reflect the Predecessor Company results of operations. The historical results of
operations for the 32 weeks ended October 28, 1995 and the 40 weeks ended August
3, 1996 are those of the Company following the Acquisition.

<TABLE>
<CAPTION>
PREDECESSOR COMPANY COMPANY
---------------------------------------------------- ---------------------------------------------------
PRO FORMA PRO FORMA
52 WEEKS ENDED 20 WEEKS 32 WEEKS 52 WEEKS 40 WEEKS 40 WEEKS
----------------------------------------- ENDED ENDED ENDED ENDED ENDED
NOV. 2, OCT. 31, OCT. 30, OCT. 29, MAR. 21, OCT. 28, OCT. 28, AUG. 5, AUG. 3,
1991 1992 1993 1994 1995 1995 1995 1995 1996
-------- -------- -------- -------- -------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS, EXCEPT SHARE AND STORE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Sales.............. $2,245.8 $2,285.7 $2,330.2 $2,409.9 $958.8 $ 1,475.0 $ 2,433.8 $ 1,889.1 $ 1,900.6
Cost of sales...... 1,775.6 1,789.0 1,815.0 1,871.5 747.6 1,136.6 1,881.7 1,465.4 1,463.6
-------- -------- -------- -------- -------- ---------- ---------- ---------- ----------
Gross profit....... 470.2 496.7 515.2 538.4 211.2 338.4 552.1 423.7 437.0
Selling, general
and
administrative
expenses......... 427.9 448.6 469.4 484.3 191.9 293.9 482.2 374.9 372.3
SARs termination
costs(a)......... -- -- -- -- 26.2 -- -- -- --
-------- -------- -------- -------- -------- ---------- ---------- ---------- ----------
Operating income
(loss)........... 42.3 48.1 45.8 54.1 (6.9) 44.5 69.9 48.8 64.7
Interest expense... 35.4 36.0 34.1 30.0 11.3 46.0 72.4 56.1 53.4
Restructuring
charges(b)....... 4.8 -- -- -- -- --
Income tax expense
(benefit)........ (0.5) 4.5 4.1 9.3 (7.1) 1.9 3.5 0.7 8.2
Extraordinary
item(c).......... -- -- -- 6.3 -- 4.6 4.6 4.6 --
Cumulative effect
of accounting
change........... -- -- -- 1.0 -- -- -- -- --
-------- -------- -------- -------- -------- ---------- ---------- ---------- ----------
Net income
(loss)........... $ 2.6 $ 7.6 $ 7.6 $ 7.5 $(11.1) (8.0) (10.6 ) (12.6 ) 3.1
======= ======= ======= ======= =========
Preferred stock
accretion........ 3.7 6.3 4.8 5.2
---------- ---------- ---------- ----------
Net loss available
to common
stockholders..... $ (11.7) $ (16.9 ) $ (17.4 ) $ (2.1)
========= ========== ========== =========
PER SHARE DATA:
Loss per common
share(d)......... $ (0.76) $ (1.10 ) $ (1.13 ) $ (0.14)
========= ========== ========== =========
Weighted average
common and common
equivalent shares
outstanding(d)... 15,411,793 15,441,324 15,427,149 15,488,574
========= ========== ========== =========
Income (loss) per
common share, as
adjusted for the
Offering(e)...... $ (0.11 ) $ 0.41
========== =========
OTHER FINANCIAL DATA:
Depreciation and
amortization..... $ 45.7 $ 49.2 $ 51.1 $ 52.9 $ 20.5 $ 25.4 $ 41.3 $ 35.6 $ 34.7
Capital
expenditures..... 62.5 39.3 31.1 60.1 22.4 23.1 45.5 31.9 25.3
EBITDA (as
adjusted)(f)..... 91.6 98.5 98.3 112.0 43.2 71.6 114.9 87.2 100.9
Cash flow from
operating
activities....... 19.2 47.9 89.9 73.2 20.0 61.8 32.4
Cash flow from
investing
activities....... (60.4) (34.3) (27.9) (55.5) (14.6) (464.6) (25.0)
Cash flow from
financing
activities....... 44.5 (9.2) (50.6) (29.4) (6.2) 441.1 3.8
STORE DATA:
Fresh Store
conversions...... 0 0 0 6 5 3 8 7 0
Stores opened
during the
period........... 6 5 1 1 0 0 0 0 4
Stores closed
during the
period........... (7) (2) (1) (1) (4) 0 (4 ) (4 ) (4)
Stores open at end
of period........ 98 101 101 101 97 97 97 97 97
Comparable store
sales growth..... (0.3)% (3.4)% (1.6)% 2.9% 2.4% 1.5% 1.8 % 2.0 % 1.1%
Average weekly
sales per store
(in thousands)... $ 441 $ 446 $ 448 $ 466 $ 484 $ 480 $ 481 $ 484 $ 494
Average sales per
selling square
foot............. $ 634 $ 611 $ 601 $ 610 $ 627 $ 606 $ 613 $ 619 $ 619
Total selling
square feet (at
end of period, in
thousands)....... 3,580 3,788 3,969 4,039 3,976 4,008 4,008 3,984 4,074
BALANCE SHEET DATA
(END OF PERIOD):
Working capital
surplus
(deficit)........ $ 15.0 $ 24.0 $ 2.0 $ (22.3) $(21.5) $ (34.2) $ (6.0)
Total assets....... 680.7 693.3 676.6 669.0 653.2 1,100.2 1,094.9
Total goodwill..... -- -- -- -- -- 419.3 422.7
Total debt......... 323.9 329.6 283.6 255.7 250.3 599.4 604.7
Redeemable
preferred
stock............ -- -- -- -- -- 43.7 49.0
Stockholders'
equity........... 97.8 103.5 110.2 116.7 104.7 96.2 94.1
</TABLE>

16
<PAGE> 18

- ------------------------------

(a) In connection with the Acquisition, the Company discharged certain
obligations under its stock appreciation rights ("SARs") plan by making
payments to plan participants. Such amount is considered an acquisition cost
for purposes of calculating the purchase price paid for the Company of $693
million.

(b) The $4.8 million restructuring charge recorded in fiscal 1991 consisted of
charges related to the closure of eight underperforming stores and early
retirement or termination of related personnel.

(c) Net income for the 52 weeks ended October 29, 1994 reflects an extraordinary
loss of $6.3 million, net of applicable income tax benefit of $3.9 million,
resulting from the retirement of $60 million principal amount of Dominick's
11.78% Senior Notes. Net income for the 32 weeks ended October 28, 1995
reflects an extraordinary loss of $4.6 million, net of applicable income tax
benefit of $2.8 million, resulting from the repayment of $150 million
principal amount under a senior subordinated credit facility and the partial
repayment of $50 million of the Old Credit Facility.

(d) Income (loss) per common share is computed based upon the weighted average
number of shares outstanding during the period. In accordance with the rules
of the Securities and Exchange Commission, 85,998 shares of common stock
issued after March 21, 1995 and 29,499 equivalent shares using the treasury
stock method for outstanding stock options granted after March 21, 1995 have
been treated as outstanding for all subsequent periods in calculating
earnings per share because such shares were issued and such options are
exercisable at prices below the assumed initial public offering price.

(e) Reflects the consummation of the sale of the Common Stock offered hereby and
the application of the estimated net proceeds therefrom, as well as certain
related transactions described under "Use of Proceeds," as if such
transactions had occurred at the beginning of the applicable period. Such
amounts are calculated based upon 21.4 million weighted average common
shares and common equivalent shares outstanding during such periods, after
giving effect to the issuance of the shares of Common Stock being offered
hereby by the Company.

(f) EBITDA (as adjusted) represents income (loss) before interest expense,
income taxes, depreciation and amortization, seller transaction expenses,
SARs expenses and termination costs, net equipment write-offs related to
closed stores and remodels, LIFO charge, restructuring charges,
extraordinary loss on extinguishment of debt and cumulative effect of
accounting change. The Company believes that EBITDA (as adjusted) provides
meaningful information regarding the Company's ability to service debt by
eliminating certain non-cash and unusual charges. However, EBITDA (as
adjusted) should not be construed as an alternative to operating income, net
income or cash flow from operating activities (as determined in accordance
with generally accepted accounting principles) and should not be construed
as an indication of the Company's operating performance or as a measure of
liquidity. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

The computation of EBITDA (as adjusted) for the period presented is as
follows (in millions):

<TABLE>
<CAPTION>
COMPANY
------------------------------------------
32
WEEKS
ENDED
OCT. 28,
1995
--------
PREDECESSOR COMPANY
---------------------------------------------------
20 PRO FORMA PRO FORMA 40
52 WEEKS ENDED WEEKS 52 WEEKS 40 WEEKS WEEKS
---------------------------------------- ENDED ENDED ENDED ENDED
NOV. 2, OCT. 31, OCT. 30, OCT. 29, MAR. 21, OCT. 28, AUG. 5, AUG. 3,
1991 1992 1993 1994 1995 1995 1995 1996
------- -------- -------- -------- -------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss).......... $ 2.6 $ 7.6 $ 7.6 $ 7.5 $(11.1) $ (8.0) $ (10.6) $ (12.6) $ 3.1
Interest expense........... 35.4 36.0 34.1 30.0 11.3 46.0 72.4 56.1 53.4
Income tax expense
(benefit)................ (0.5) 4.5 4.1 9.3 (7.1) 1.9 3.5 0.7 8.2
Depreciation and
amortization............. 45.7 49.2 51.1 52.9 20.5 25.4 41.3 35.6 34.7
SARs expenses.............. 0.1 0.3 0.4 2.0 0.6 -- -- -- --
SARs termination costs..... -- -- -- -- 26.2 -- -- -- --
Seller transaction
expenses................. -- -- -- 0.2 0.8 -- -- -- --
Net equipment write-offs... 1.9 0.3 0.6 1.7 1.3 -- 1.3 1.3 --
LIFO charge................ 1.6 0.6 0.4 1.1 0.7 1.7 2.4 1.5 1.5
Restructuring charges...... 4.8 -- -- -- -- -- -- -- --
Extraordinary loss on
extinguishment
of debt ................. -- -- -- 6.3 -- 4.6 4.6 4.6 --
Cumulative effect of
accounting change........ -- -- -- 1.0 -- -- -- -- --
----- ----- ----- ------ ------ ----- ------ ------ ------
EBITDA (as adjusted)....... $91.6 $ 98.5 $ 98.3 $112.0 $ 43.2 $ 71.6 $ 114.9 $ 87.2 $100.9
===== ===== ===== ====== ====== ===== ====== ====== ======
</TABLE>

17
<PAGE> 19

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Over the past five fiscal years, the Company's sales increased
approximately 8.4% from $2.2 billion in fiscal 1991 to $2.4 billion in fiscal
1995. This growth occurred despite the fact that the total number of stores
operated by the Company decreased slightly, from 98 at the end of fiscal 1991 to
97 at the end of fiscal 1995. Management believes that this sales growth has
resulted in large measure from the substantial steps the Company has taken to
strengthen its store base over this period by remodeling existing stores,
closing certain underperforming stores and selectively adding new stores.
Through fiscal 1991, the Company's capital expenditure program focused on
developing combination food and drug stores and adding pharmacies and expanded
health and beauty care product lines to many stores which were previously
considered conventional supermarkets and creating a critical mass of Omni
stores. In addition to upgrading its store base through capital expenditures,
the Company began to focus on "rationalizing" its conventional store base (i.e.,
closing, converting or replacing underperforming stores). Seven underperforming
stores were closed in fiscal 1991 and an additional eight conventional
supermarkets were closed through the end of fiscal 1995. In order to maximize
the effectiveness of the remaining conventional supermarkets, the Company began
to focus on upgrading their perishable departments and developed new prototypes
to convey a stronger image of quality, selection and freshness to the customer.
These efforts led to the introduction of the Fresh Store concept at the
beginning of fiscal 1994. During the five-year period ended October 28, 1995,
the Company completed 27 major remodels (including the 14 Fresh Store
conversions). In addition to its remodeling and store rationalization
initiatives, the Company continued to build new stores on a selective basis.
From the beginning of fiscal 1991 through the end of fiscal 1995, the Company
opened four Dominick's combination food and drug stores and nine Omni stores.

Store Mix. As a result of its store rationalization and capital expenditure
program, the Company's store mix (by number of stores) changed from 54%
conventional, 34% combination food and drug and 12% Omni at the end of fiscal
1991 to 25% conventional, 39% combination food and drug, 19% Fresh Stores and
17% Omni at August 3, 1996. This store mix change, along with the remodels and
departmental improvements discussed above, resulted in a significant increase in
total sales despite the reduction of one store, as average weekly sales per
store increased from $441,000 in fiscal 1991 to $481,000 in fiscal 1995. In
addition, gross margins improved slightly from fiscal 1991 to fiscal 1995 due to
an improvement in gross margin at the Omni stores as the Omni store base matured
and an increase in the number of combination food and drug stores (which
generally have higher margins than conventional stores due to their product mix
and increased offerings of higher-margin perishables). This margin increase was
realized in spite of both the increase in the number of Omni stores as a
percentage of total Company stores, as these stores generally have lower margins
than either conventional supermarkets or combination food and drug stores, and
the negative impact on gross margins resulting from the store disruptions during
the Fresh Store conversions in fiscal 1995. Management believes that as a result
of its store rationalization and capital expenditure programs and its continued
emphasis on opening new Fresh Stores and Omni stores, the Company is well
positioned for future growth.

Fresh Store Conversions. One key aspect of the Company's store
rationalization and capital expenditure programs has been the implementation of
the Fresh Store concept. Dominick's 18 Fresh Stores are enhanced combination
food and drug stores which are designed to create a European-style fresh market
atmosphere and emphasize the store's visual appeal and quality merchandise
perception. The Company's Fresh Stores feature significant upgrades in store
design and offer an expanded assortment of high quality fresh produce and other
perishables, a large selection of restaurant-quality prepared foods for
carry-out and in-store dining and a superior line of freshly baked goods and
pastry items. Fresh Stores also typically offer expanded delicatessen, bakery,
meat, seafood and floral departments, and additional service departments such as
a gourmet coffee cafe. The first Fresh Store was introduced in 1993 through the
conversion of an existing conventional supermarket. A total of 14 stores have
now been converted, resulting in an average increase in customer counts, sales
per square foot and store contribution margins for the converted stores over
pre-conversion levels. In addition, by focusing customers on the increased
offerings of higher-margin perishables and prepared products, the Fresh Store
concept is intended to produce a more favorable margin mix. Although the

18
<PAGE> 20

Company believes that the Fresh Store conversions will strengthen the Company's
financial performance as the converted stores mature, it also believes that its
operating results in fiscal 1994 and fiscal 1995 were adversely impacted by the
conversion program. The conversions completed in fiscal 1994 and fiscal 1995
generally required complete renovation of the stores (at an estimated average
capital expenditure of approximately $5.2 million per store conversion) and
created significant disruptions to normal retail operations during the
construction period. The Company estimates that the cost of future Fresh Store
conversions will be comparable to such historical costs. The Company estimates
that its capital expenditures associated with the opening of four new Fresh
Stores in fiscal 1996 were approximately $2.7 million per store. The capital
expenditures for opening new Fresh Stores are lower than the historical cost of
conversion due to the fact that store construction is the responsibility of the
site developer and such construction costs are amortized over the life of the
associated lease. In addition, although the converted stores have generally
achieved increased sales levels relatively quickly following their grand
openings as Fresh Stores, their profitability has been adversely affected during
the six-month ramp-up period following such grand openings as a result of
increased promotional costs and other nonrecurring start-up expenses. The
Company held grand openings for six Fresh Stores in fiscal 1994 and an
additional eight Fresh Stores in fiscal 1995. In addition to the seven Fresh
Stores already opened in fiscal 1996, one more Fresh Store is scheduled to be
opened by the end of fiscal 1996. The Company's current expansion plan calls for
the construction of nine new Fresh Stores and the Company is evaluating the
feasibility of converting up to five additional stores to the Fresh Store
concept in fiscal 1997. Because future Fresh Store conversions are expected to
be completed more evenly over future periods, the Company does not expect them
to cause the same magnitude of adverse short-term financial consequences which
it experienced during the period of concentrated conversion efforts in fiscal
1994 and fiscal 1995.

Acquisition Accounting. The Acquisition was accounted for as a purchase of
Dominick's by the Company. As a result, all financial statements for periods
subsequent to March 22, 1995, the date the Acquisition was consummated, reflect
Dominick's assets and liabilities at their estimated fair market values as of
March 22, 1995. The purchase price in excess of the fair market value of
Dominick's assets was recorded as goodwill and is being amortized over a 40-year
period. The Company's purchase price allocation resulted in a reduction in the
carrying value of Dominick's fixed assets of approximately $83 million and in
goodwill of approximately $438 million. Dominick's total debt also increased
substantially from approximately $250 million at March 21, 1995 to approximately
$602 million on the date of the Acquisition. As a result of these changes, the
Company's results of operations in periods subsequent to the Acquisition reflect
reduced levels of depreciation and significantly increased levels of
amortization and interest expense. In connection with the Acquisition, the
Company established a closed store reserve in the amount of approximately $26.4
million to cover costs of stores closed, or expected to be closed, at the time
of the Acquisition. For a discussion of certain fees and expenses and other
amounts paid in connection with the Acquisition (which were accounted for as
part of the purchase price), see "The Acquisition" and the Notes to Consolidated
Financial Statements included elsewhere herein.

Forward-Looking Statements. When used in this Prospectus, the words
"estimate," "expect," "project" and similar expressions are intended to identify
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Such statements are subject to certain risks and uncertainties,
including those discussed under "Risk Factors" above, that could cause actual
results to differ materially from those projected. These forward-looking
statements speak only as of the date hereof. All of these forward-looking
statements are based on estimates and assumptions made by management of the
Company, which although believed to be reasonable, are inherently uncertain and
difficult to predict; therefore, undue reliance should not be placed upon such
estimates. There can be no assurance that the growth, savings or other benefits
anticipated in these forward-looking statements will be achieved. In addition,
there can be no assurance that unforeseen costs and expenses or other factors
will not offset or adversely affect the expected growth, cost savings or other
benefits in whole or in part. For a discussion of certain risks which may affect
the Company or the trading price of the Common Stock, see "Risk Factors."

19
<PAGE> 21

RESULTS OF OPERATIONS

The following table sets forth the historical operating results of the
Predecessor Company for fiscal 1993 and fiscal 1994, the pro forma operating
results of the Company for the 52 weeks ended October 28, 1995 and the 40 weeks
ended August 5, 1995, in each case giving effect to the Acquisition and certain
related transactions, and the historical operating results of the Company for
the 40 weeks ended August 3, 1996, expressed in millions of dollars and as a
percentage of sales:

<TABLE>
<CAPTION>
COMPANY
-----------------------------------------------------
PREDECESSOR COMPANY
----------------------------------
PRO FORMA PRO FORMA
52 WEEKS ENDED 52 WEEKS 40 WEEKS 40 WEEKS
---------------------------------- ENDED ENDED ENDED
OCT. 30, 1993 OCT. 29, 1994 OCT. 28, 1995 AUG. 5, 1995 AUG. 3, 1996
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales............................... $2,330.2 100.0% $2,409.9 100.0% $2,433.8 100.0% $1,889.1 100.0% $1,900.6 100.0%
Gross profit........................ 515.2 22.1 538.4 22.3 552.1 22.6 423.7 22.4 437.0 23.0
Selling, general and administrative
expenses.......................... 469.4 20.1 484.3 20.1 482.2 19.8 374.9 19.8 372.3 19.6
Operating income.................... 45.8 2.0 54.1 2.2 69.9 2.8 48.8 2.6 64.7 3.4
Interest expense.................... 34.1 1.5 30.0 1.2 72.4 2.9 56.1 3.0 53.4 2.8
Income tax expense.................. 4.1 0.2 9.3 0.4 3.5 0.1 0.7 -- 8.2 0.4
Extraordinary loss on extinguishment
of debt........................... -- -- 6.3 0.3 4.6 0.2 4.6 0.2 -- --
Cumulative effect of accounting
change............................ -- -- 1.0 -- -- -- -- -- -- --
Net income (loss)................... 7.6 0.3 7.5 0.3 (10.6) (0.4) (12.6) (0.6) 3.1 0.2
Preferred stock accretion........... -- -- -- -- 6.3 0.3 4.8 0.3 5.2 0.3
Net income (loss) available to
common stockholders............... $ 7.6 0.3 $ 7.5 0.3 $ (16.9) (0.7) $ (17.4) (0.9) $ (2.1) (0.1)
</TABLE>

The following discussion of the Company's results of operation should be
read in conjunction with the consolidated financial statements of the Company
together with the related notes thereto and other information included elsewhere
herein.

COMPARISON OF RESULTS OF OPERATIONS FOR THE 40 WEEKS ENDED AUGUST 3, 1996
(HISTORICAL) WITH THE 40 WEEKS ENDED AUGUST 5, 1995 (PRO FORMA)

Sales: Sales increased $11.5 million, or 0.6%, from $1,889.1 million in the
40 weeks ended August 5, 1995, to $1,900.6 million in the 40 weeks ended August
3, 1996. The increase in sales in the fiscal 1996 period was primarily
attributable to a 1.1% increase in comparable store sales, partially offset by
the impact of the closure of four conventional stores during fiscal 1995. The
computation of "comparable store" sales growth excludes the sales of a store for
any period if such store or a comparable store was not open during the entire
preceding fiscal year. Replacement stores and stores expanded through remodeling
are considered comparable stores.

Gross Profit: Gross profit increased $13.3 million, or 3.1%, from $423.7
million in the 40 weeks ended August 5, 1995, to $437.0 million in the 40 weeks
ended August 3, 1996. Gross profit as a percentage of sales increased from 22.4%
in the 40 weeks ended August 5, 1995, to 23.0% in the 40 weeks ended August 3,
1996, due primarily to the reduction of product costs resulting from purchasing
improvements and improved perishable and drug department gross profit. The
increase in gross profit from perishables reflects the maturing of the converted
Fresh Stores.

Selling, General and Administrative Expense: Selling, general and
administrative expense ("SG&A") decreased $2.6 million, or 0.7%, from $374.9
million in the 40 weeks ended August 5, 1995 to $372.3 million in the 40 weeks
ended August 3, 1996. SG&A decreased from 19.8% of sales in the 40 weeks ended
August 5, 1995, to 19.6% of sales in the 40 weeks ended August 3, 1996. The
decrease in SG&A reflects improved labor productivity and reduced overhead
costs.

Operating Income: Operating income for the 40 weeks ended August 3, 1996
increased $15.9 million, or 32.6%, from $48.8 million in the 40 weeks ended
August 5, 1995, to $64.7 million as a result of the factors discussed above.

20
<PAGE> 22

Interest Expense: Interest expense decreased from $56.1 million in the 40
weeks ended August 5, 1995 to $53.4 million in the 40 weeks ended August 3, 1996
primarily due to slightly lower interest rates and borrowing levels.

Net Income (Loss): Net income increased $15.7 million from a net loss of
$12.6 million in the 40 weeks ended August 5, 1995 to a net income of $3.1
million in the 40 weeks ended August 3, 1996, as a result of the factors
discussed above. After deducting preferred stock accretion of $4.8 million in
the 40 weeks ended August 5, 1995 and $5.2 million in the 40 weeks ended August
3, 1996, net loss available to common stockholders improved from a loss of $17.4
million in the 40 weeks ended August 5, 1995 to a loss of $2.1 million in the 40
weeks ended August 3, 1996.

COMPARISON OF RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED OCTOBER 28, 1995 (PRO
FORMA) WITH THE 52 WEEKS ENDED OCTOBER 29, 1994 (PREDECESSOR COMPANY)

Sales: Sales increased $23.9 million, or 1.0%, from $2,409.9 million in
fiscal 1994 to $2,433.8 million in fiscal 1995. The increase in sales in fiscal
1995 was primarily attributable to a 1.8% increase in comparable store sales and
additional sales due to the opening of one new Omni store in May 1994 partially
offset by the impact of the closure of four conventional stores in fiscal 1995.
The growth in comparable store sales primarily reflects strong sales results at
the 14 Fresh Stores opened prior to the end of fiscal 1995.

Gross Profit: Gross profit increased $13.7 million, or 2.5%, from $538.4
million in fiscal 1994 to $552.1 million in fiscal 1995. Gross profit as a
percentage of sales increased from 22.3% in fiscal 1994 to 22.6% in fiscal 1995.
The increase in gross margin was due primarily to the increased gross profit
contribution from the perishable departments resulting from the Fresh Stores
opened prior to the beginning of fiscal 1995 which more than offset the
continuing effects of the Fresh Store conversion program in fiscal 1995.

Selling, General and Administrative Expense: SG&A decreased $2.1 million,
or 0.4%, from $484.3 million in fiscal 1994 to $482.2 million in fiscal 1995.
SG&A decreased from 20.1% of sales in fiscal 1994 to 19.8% of sales in fiscal
1995. The decrease in SG&A as a percentage of sales is due primarily to reduced
depreciation and amortization expenses resulting from purchase accounting
adjustments which reduced the net carrying value of the Company's fixed assets,
offset somewhat by the elimination of certain non-recurring regulatory-ordered
utility refunds which lowered utility costs in fiscal 1994.

Operating Income: Operating income increased $15.8 million, or 29.2%, from
$54.1 million in fiscal 1994 to $69.9 million in fiscal 1995, as a result of the
factors discussed above.

Interest Expense: Interest expense increased from $30.0 million in fiscal
1994 to $72.4 million in fiscal 1995 primarily due to the increased indebtedness
outstanding following the Acquisition.

Net Income (Loss): Net income decreased from $7.5 million in fiscal 1994 to
a net loss of $10.6 million in fiscal 1995. Pro forma net income in fiscal 1995
was adversely affected by an extraordinary charge of $4.6 million associated
with the repayment of $150 million principal amount of Dominick's senior
subordinated credit facility and the prepayment of $50 million principal amount
of Dominick's term loan facilities. Net income in fiscal 1994 was adversely
affected by an extraordinary charge of $6.3 million associated with the
prepayment of $60 million principal amount of Dominick's 11.78% Senior Notes and
a $1.0 million charge to reflect the cumulative effect on prior years of the
change in the Company's accounting for income taxes. Other factors affecting net
income (loss) are discussed above.

COMPARISON OF RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED OCTOBER 29, 1994
(PREDECESSOR COMPANY) WITH THE 52 WEEKS ENDED OCTOBER 30, 1993 (PREDECESSOR
COMPANY)

Sales: Sales increased $79.7 million, or 3.4%, from $2,330.2 million in
fiscal 1993 to $2,409.9 million in fiscal 1994. The increase resulted primarily
from a 2.9% increase in comparable store sales, the opening of one new store in
fiscal 1993 and one new store in fiscal 1994 and the completion of one major
remodel and six Fresh Store conversions in fiscal 1994. The increase in
comparable store sales was attributable to continued strong performance of the
Omni format, service department upgrades introduced at Dominick's stores and a
slight improvement in general economic conditions.

21
<PAGE> 23

Gross Profit: Gross profit increased $23.2 million, or 4.5%, from $515.2
million in fiscal 1993 to $538.4 million in fiscal 1994. Gross profit increased
as a percentage of sales from 22.1% in fiscal 1993 to 22.3% in fiscal 1994, due
to an increase in Omni's gross profit which was offset by a slight decrease in
Dominick's gross profit. The decrease in Dominick's gross profit reflected
slightly more promotional activity, partially offset by improvements in product
procurement and an increase in vendor participation in the Company's promotional
costs. The increase in Omni's gross profit resulted primarily from improvements
in product procurement, as well as an increase in vendor participation in the
Company's promotional costs.

Selling, General and Administrative Expense: SG&A increased $14.9 million,
or 3.2%, from $469.4 million in fiscal 1993 to $484.3 million in fiscal 1994.
SG&A as a percentage of sales remained unchanged at 20.1%. The increase in SG&A
is primarily due to the increased sales levels in fiscal 1994 and increased
advertising expenses at the Fresh Stores, offset somewhat by lower utility costs
due to $4.5 million of non-recurring regulatory-ordered utility refunds and
better management of store-level labor costs.

Operating Income: Operating income increased $8.3 million, or 18.1%, from
$45.8 million in fiscal 1993 to $54.1 million in fiscal 1994 as a result of the
factors discussed above.

Interest Expense: Interest expense decreased from $34.1 million in fiscal
1993 to $30.0 million in fiscal 1994. The decrease in interest expense was due
primarily to the reduction in the Company's overall interest expense resulting
from the prepayment of $60 million principal amount of Dominick's 11.78% Senior
Notes.

Net Income (Loss): Net income decreased slightly to $7.5 million in fiscal
1994 from $7.6 million in fiscal 1993. Net income in fiscal 1994 was adversely
affected by an extraordinary charge of $6.3 million associated with the
prepayment of $60 million principal amount of Dominick's 11.78% Senior Notes and
a $1.0 million charge to reflect the cumulative effect on prior years of a
change in the Company's accounting for income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Following the consummation of the Offering, the Company's principal sources
of liquidity will be cash flow from operations, borrowings under the New
Revolving Facilities and capital and operating leases. The Company's principal
uses of liquidity are to provide working capital, finance capital expenditures
and meet debt service requirements.

In connection with the Offering, the Company intends to enter into the New
Credit Facility which will provide for the $100 million amortizing New Term
Loan, the $105 million New Revolving Term Facility and the $120 million New
Revolving Facility, each of which has a six and one-half year term. The New
Revolving Facilities will be available for working capital and general corporate
purposes, including up to $50 million of the New Revolving Facility to support
letters of credit. The Company utilizes letters of credit to cover workers'
compensation self-insurance liabilities and for other general purposes. Letters
of credit for approximately $17.2 million were issued under the Old Credit
Facility at August 3, 1996. Up to $20 million of the New Revolving Facility will
be available as a swingline facility (i.e., a facility which permits same-day
borrowings directly from the agent under the New Credit Facility). The Company
will not be required to reduce borrowings under the New Revolving Facilities by
a specified amount each year. The New Term Loan will require quarterly
amortization payments commencing in the second year following the consummation
of the Offering in amounts ranging from $2.5 million to $7.5 million per
quarter. The Company will also be required to make prepayments under the New
Credit Facility, subject to certain exceptions, with a percentage of its
consolidated excess cash flow and with the proceeds from certain asset sales,
issuances of debt securities and any pension plan reversions. See "Description
of Certain Indebtedness."

The Company will use approximately $51.7 million of the estimated net
proceeds of the Offering to repurchase all of its outstanding Redeemable
Preferred Stock. Approximately $30.5 million of the Offering proceeds, together
with approximately $45.0 million of available cash and approximately $193.8
million of borrowings under the New Term Loan and the New Revolving Facility
will be used to repay all outstanding borrowings under the Old Credit Facility.
The remaining $10.5 million of net proceeds of the Offering will be

22
<PAGE> 24

used to terminate the Company's obligation under its consulting agreement with
Yucaipa. See "Certain Transactions."

The Company (and the Predecessor Company) generated approximately $81.8
million of cash from operating activities during the 52-week period ended
October 28, 1995 compared to $73.2 million during the 52-week period ended
October 29, 1994. During the 40-week period ended August 3, 1996 the Company
generated approximately $32.4 million of cash from operating activities compared
to $61.0 million generated by the Company (and the Predecessor Company) during
the 40-week period ended August 5, 1995. One of the principal uses of cash in
the Company's operating activities is inventory purchases. However, supermarket
operators typically require small amounts of working capital since inventory is
generally sold prior to the time that payments to suppliers are due. This
reduces the need for short-term borrowings and allows cash from operations to be
used for non-current purposes such as financing capital expenditures and other
investing activities. Consistent with this pattern, the Company had a working
capital deficit of $34.2 million at October 28, 1995 and $6.0 million at August
3, 1996.

The Company (and the Predecessor Company) used $479.2 million in investing
activities for the 52 weeks ended October 28, 1995. Investing activities
consisted primarily of $442.8 million related to the Acquisition (net of cash
acquired) and capital expenditures of $45.5 million. Capital expenditures
related to store remodels, Fresh Store conversions and new store openings and,
to a lesser extent, expenditures for warehousing, distribution, and
manufacturing facilities and equipment, including data processing and computer
systems. The Company used $25.0 million in investing activities for the 40 weeks
ended August 3, 1996, primarily for capital expenditures.

The Company plans to make gross capital expenditures of approximately $56
million (or $23 million net of expected capital leases) in fiscal 1996. Such
expenditures consist of approximately $45 million related to remodels and new
stores, as well as ongoing store expenditures for equipment and maintenance, and
approximately $11 million related to warehousing, distribution and manufacturing
facilities and equipment, including data processing and computer equipment.
Management expects that these capital expenditures will be financed primarily
through cash flow from operations and capital leases. The capital expenditure
budget for fiscal 1996 does not include certain environmental remediation costs
which are estimated to range from approximately $4.1 million to $5.7 million
(the Company's net share of which is presently estimated at approximately $2.4
million, after contributions by the prior owners of the Predecessor Company
pursuant to the terms of the stock purchase agreement associated with the
Acquisition (the "Stock Purchase Agreement"), and for which an accrual has been
provided in the Company's financial statements) and which are expected to be
incurred over the next several years. In December 1995, the Company sold and
leased back under capital leases approximately $17 million of certain existing
owned equipment. The Company currently anticipates gross capital expenditures of
approximately $75 million (or $60 million net of expected capital leases) in
fiscal 1997.

The Company has historically utilized leasing facilities to finance the
cost of new store equipment and fixtures. At August 3, 1996, the Company had an
$18 million lease facility available which it anticipates will be substantially
utilized in connection with its new store program in the fourth quarter of
fiscal 1996 and the first quarter of fiscal 1997. The Company will seek
additional lease facilities as required to support its capital expenditure
program.

The capital expenditure plans discussed above do not include potential
acquisitions which the Company could make to expand within its existing market
or contiguous markets. The Company may consider such acquisition opportunities
from time to time. Any such future acquisition may require the Company to seek
additional debt or equity financing.

The Company is a holding company that has no material operations and no
material assets other than its ownership of the capital stock of Dominick's. As
a result, the Company is dependent upon distributions or advances from
Dominick's to obtain cash to pay dividends or for other corporate purposes.
Dominick's principal debt instruments generally restrict Dominick's from paying
dividends or otherwise distributing cash to the Company, except under certain
limited circumstances, including for the payment of taxes and, subject to

23
<PAGE> 25

limitations, for general administrative purposes. See "Risk
Factors -- Limitations on Access to Cash Flow of Dominick's" and "Description of
Certain Indebtedness."

The Company, in the ordinary course of its business, is party to various
legal actions. One case currently pending alleges gender discrimination by
Dominick's and seeks compensatory and punitive damages in an unspecified amount.
Several motions in the case are currently pending before the court, including a
motion for class certification. Due to the numerous legal and factual issues
which must be resolved during the course of this litigation, the Company is
unable to predict the ultimate outcome of this lawsuit. If Dominick's were held
liable for the alleged discrimination (or otherwise concludes that it is in the
Company's best interest to settle the matter), it could be required to pay
monetary damages (or settlement payments) which, depending on the outcome of the
class certification motion (and the size of any class certified), the theory of
recovery or the resolution of the plaintiffs' claims for compensatory and
punitive damages, could be substantial and could have a material adverse effect
on the Company. However, based upon the current state of the proceedings, the
Company's assessment to date of the underlying facts and circumstances and the
other information currently available, and although no assurances can be given,
the Company does not believe that the resolution of this litigation will have a
material adverse effect on the Company. See "Risk Factors -- Potential Adverse
Effects of Pending Litigation."

The Company is highly leveraged. Based upon current levels of operations and
anticipated cost savings and future growth, the Company believes that its cash
flow from operations, together with available borrowings under the New Revolving
Facility and its other sources of liquidity (including leases) will be adequate
to meet its anticipated requirements for working capital, debt service and
capital expenditures over the next few years.

EFFECTS OF INFLATION

The Company does not believe that inflation has had any significant impact
on the Company's operations. The Company's primary costs, inventory and labor,
are affected by a number of factors that are beyond its control, including, in
addition to inflation, the availability and price of merchandise, the
competitive climate and general and regional economic conditions. As is typical
of the supermarket industry, the Company has generally been able to maintain
gross profit margins by adjusting its retail prices, but competitive conditions
may from time to time render it unable to do so while maintaining its market
share.

24
<PAGE> 26

BUSINESS

The Company is the second largest supermarket operator in the greater
Chicago metropolitan area, with 97 stores and fiscal 1995 revenues of
approximately $2.4 billion. Through its 70 years of operation, the Company has
developed a valuable and strategically located store base, strong name
recognition, customer loyalty and a reputation as a quality and service leader
among Chicago-area supermarket chains. The Company operates 80 full-service
supermarkets under the Dominick's(R) name, including 18 Fresh Stores, and 17
price impact supermarkets under the Omni name. The Company is the only
Chicago-area supermarket chain to operate both full-service and price impact
formats, which allows it to serve a broader customer base and to tailor its
stores to the demographic characteristics of individual store locations. The
Company has a well-maintained and modern store base, with approximately 73% of
its stores new or remodeled since 1989. While the Company's total number of
stores has remained relatively constant since 1989, the Company's average
selling square feet per store has increased by approximately 27%. The Company
also owns and operates two primary distribution facilities totaling
approximately 1.4 million square feet, a satellite facility of approximately
285,000 square feet and a dairy processing plant. In addition, the Company's
management team has proven experience in successfully developing and operating
both full-service and price impact supermarkets. The Company believes these
factors have helped it to increase its market share among Chicago-area
supermarkets from 19.0% in 1989 to 25.4% in 1995.

STORE FORMATS

DOMINICK'S. The Company's Dominick's format stores are full-service
supermarkets that emphasize quality, freshness and service. The Company
classifies its Dominick's stores into three categories:

Conventional Supermarkets. Dominick's 24 conventional supermarkets are
typically located in higher density population areas, average approximately
43,400 square feet in size (including approximately 29,100 square feet of
selling space) and offer approximately 35,000 SKUs. All of the Company's
conventional supermarkets include a variety of service departments
typically found in full-service supermarkets such as delicatessen, bakery,
meat and seafood departments and a limited selection of health and beauty
care products. In addition, many stores also offer salad bars, prepared
foods, floral departments, film processing and liquor. In fiscal 1991, the
Company began to rationalize its base of 53 conventional supermarkets.
Since then, in addition to the Fresh Store conversions, the Company closed
certain underperforming conventional supermarkets. The Company's 24
remaining conventional supermarkets are stores which are primarily in
locations where either replacement sites are not available or the
demographics of the area do not justify a conversion to a different format.

Combination Food and Drug Stores. Dominick's 38 combination food and
drug stores average approximately 57,600 square feet (including
approximately 40,300 square feet of selling space) and offer approximately
60,000 SKUs. The combination food and drug stores offer all products and
services typically found in a conventional supermarket and, by virtue of
their large size, include a full service drug store complete with a
pharmacy, a broader line of health and beauty care products and an expanded
selection of seasonal merchandise.

Fresh Stores. Dominick's 18 Fresh Stores are enhanced combination food
and drug stores designed to create a European-style fresh market atmosphere
and emphasize the store's visual appeal and quality merchandise perception.
The Company's Fresh Stores feature significant upgrades in store design and
fixtures in order to emphasize an expanded assortment of high quality fresh
produce and other perishables, a large selection of restaurant-quality
prepared foods for carry-out and in-store dining and a superior line of
freshly baked goods and pastry items. Fresh Stores also typically offer
expanded delicatessen, bakery, meat, seafood and floral departments and
additional service departments such as a gourmet coffee cafe. The first
Fresh Store was introduced in 1993 through the conversion of an existing
conventional supermarket. A total of 14 stores have been converted to date,
resulting in an average increase in customer counts, sales per square foot
and store contribution margins for the converted stores over pre-conversion
levels. Converted Fresh Stores average approximately 53,000 square feet in
size (including approximately 39,300 square feet of selling space) while
new Fresh Stores are expected to

25
<PAGE> 27

average approximately 70,000 square feet (including approximately 55,000
square feet of selling space). In addition to the 14 converted stores, four
new Fresh Stores have been opened and an estimated 20 additional Fresh
Stores are expected to be opened or converted by the end of fiscal 1998.

OMNI. The Company's 17 Omni stores are high-volume, price impact
combination food and drug stores emphasizing low prices and a broad selection of
products while offering less extensive service departments than traditional
full-service supermarkets. Omni stores average approximately 92,300 square feet
(including approximately 65,300 square feet of selling space). The Omni format
has enabled the Company to expand its overall share of the market, as it
attracts the price-conscious shopper who typically would choose a price-oriented
food store over a traditional full-service supermarket. Omni stores have an
approximate 7.2% market share, giving Omni the third largest market share among
Chicago-area supermarkets on a stand-alone basis.

Introduced in 1987 as a response to the entrance of warehouse stores into
the Chicago area, Omni stores offer modified everyday low prices and compete
effectively with warehouse formats and other discount retailers in the Chicago
area. The Company believes that Omni's prices are approximately 10% below those
offered by traditional full-service supermarkets. Omni's marketing program
emphasizes its low prices and reinforces its image with merchandising
presentations such as a "Wall of Values" located near the entrance of the store
which presents the customer with a selection of specially priced merchandise. To
support its low prices, Omni is managed with a strict focus on cost control.
This is achieved through labor efficiencies created by the implementation of
time and cost saving measures such as presenting selected merchandise on
pallets, offering a limited number of service departments and eliminating
certain services such as bagging and customer pickup. The Omni stores also
eliminate certain capital improvements such as more expensive in-store graphics
and fixtures.

All of the Omni stores include service departments in deli, bakery and
seafood, in addition to self-service meat, produce, liquor, bulk foods and club
merchandise departments and a pharmacy. Each Omni store also offers a large
selection of high-turnover general merchandise items typically found in drug and
discount stores, including seasonal items for holiday and back-to-school
seasons. The expanded general merchandise selection is utilized to increase
variety for higher customer draw. All Omni stores also include in-store banking.
Unlike the Dominick's format, the Omni format does not offer salad bars, special
promotions or extensive front-end services.

GROWTH AND OPERATING STRATEGY

Accelerate New Store Program. From 1987 until 1993, the Company's store
development program was focused primarily on developing combination food and
drug stores or converting existing conventional Dominick's stores to the
combination format, closing underperforming stores and creating a critical mass
of Omni stores. From fiscal 1994 until the Acquisition, the Company's growth
plan was focused on the conversion of existing stores to the Fresh Store
concept. During that period, only one new store was opened. Since the
Acquisition, management and Yucaipa have developed a growth strategy designed to
emphasize the expansion of the Dominick's store format in areas currently
underserved by the Company. As part of this strategy, management undertook an
aggressive plan to identify and develop new store sites and has since opened
seven new Fresh Stores during the second half of fiscal 1996 and expects to open
one additional Fresh Store during the fourth quarter of fiscal 1996. In
addition, management expects to continue to grow the Company's store base by
opening nine Fresh Stores and one Omni store in fiscal 1997 and seven Fresh
Stores and one Omni store in fiscal 1998.

Expand Dominick's Fresh Store Concept. The results of the Company's 14
Fresh Store conversions have been highly favorable and have resulted in an
average increase in estimated annualized sales of approximately 27% compared to
such stores prior to their conversion. It is currently anticipated that
substantially all of the Company's new Dominick's combination food and drug
stores will be Fresh Stores. A number of existing Dominick's conventional
supermarkets and combination food and drug stores will also be converted to
Fresh

26
<PAGE> 28

Stores over the next two years. In addition, certain elements of the Fresh Store
concept, including expanded produce and perishable departments, are currently
being incorporated into many of the remaining Dominick's stores as part of the
chain-wide emphasis on high quality perishables. The Company believes that the
expansion of its Fresh Store concept through the addition of new stores and the
conversion of existing stores should have a favorable impact on the Company's
growth in sales and profitability.

Continue to Improve Profit Margins. At the time of the Acquisition,
management and Yucaipa identified areas of opportunity for operating
improvements which they believed would result in approximately $23 million of
annual cost reductions compared to pre-Acquisition levels. These included: (i)
purchasing improvements resulting in part from renegotiating vendor contracts
and coordinating its buying efforts with other Yucaipa-managed supermarket
chains, (ii) labor productivity improvements resulting from increased automation
of labor planning systems and changes in labor processes and procedures, (iii)
general and administrative expense and occupancy expense reductions and (iv)
other merchandising and buying improvements. The Company believes that, as of
the end of the third quarter of fiscal 1996, it had implemented operating
improvements which should provide, on an annualized basis, a level of cost
savings substantially equal to the $23 million estimated at the time of the
Acquisition. The Company believes that approximately $17 million of such cost
savings are reflected in its results of operations for the 52-week period ended
August 3, 1996. In addition, since the Acquisition management has identified
additional potential cost savings and efficiencies, including an increase in the
percentage of private label sales which it plans to implement in future periods.
The Company believes that these cost savings, combined with the greater number
of Fresh Stores, should result in higher overall operating margins than the
Company has experienced historically.

STORE DEVELOPMENT

The Company's 70 years of operation in the Chicago area have allowed it to
build its store locations selectively, and management believes that the
Company's current locations include many prime store sites in developed urban
and suburban areas which would be difficult to replicate. In addition to
upgrading its store base through capital expenditures, the Company began to
focus on rationalizing its conventional supermarket base in fiscal 1991. Between
November 1990 and October 1995, 15 conventional supermarkets were closed. This
store rationalization program also included an evaluation of the Company's
perishable departments. In order to maximize the effectiveness of the remaining
conventional supermarkets, the Company began to focus on upgrading their
perishable departments and developing new prototypes to convey a stronger image
of quality, selection and freshness to the customer. Capital investment was
directed toward selectively adding improvements such as European-style bakeries
and enhanced deli departments to existing Dominick's stores. These efforts led
to the introduction of the Fresh Store concept at the beginning of fiscal 1994.
In addition to its remodeling and store rationalization initiatives, the Company
continued to build new stores on a selective basis. From the start of fiscal
1991 through the end of fiscal 1995 the Company opened four combination food and
drug stores and nine Omni stores.

The Company introduced its first Fresh Store in November 1993. To date, the
Company has converted 14 stores to Fresh Stores at a total capital cost of
approximately $70 million and has opened four new Fresh Stores. The Fresh Store
conversions were very extensive, as these stores required complete overhauls and
expansion of selling space. The results of the Company's 14 conversions of
existing stores to Fresh Stores have been highly favorable and have resulted in
an average increase in annualized sales of approximately 27% compared to such
stores prior to their conversion. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- General -- Fresh Store
Conversions."

27
<PAGE> 29

The following table sets forth additional information concerning changes in
the Company's store base.

<TABLE>
<CAPTION>
40 WEEKS
FISCAL YEAR ENDED
---------------------------------------- AUG. 3,
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
TOTAL STORES:
Beginning of period.......................... 99 98 101 101 101 97
Opened.................................... 6 5 1 1 0 4
Closed.................................... (7) (2 ) (1 ) (1 ) (4 ) (4)
-- --
--- --- --- ---
End of period................................ 98 101 101 101 97 97
== === === === === ==
REMODELS AND CONVERSIONS:
Major remodels............................... 3 4 1 1 4 3
Fresh Store conversions...................... 0 0 0 6 8 0
STORES BY FORMAT (END OF PERIOD):
Dominick's:
Conventional.............................. 53 47 45 38 27 24
Combination food and drug................. 33 39 40 40 39 38
Fresh Stores.............................. 0 0 0 6 14 18
-- --
--- --- --- ---
Subtotal............................. 86 86 85 84 80 80
Omni......................................... 12 15 16 17 17 17
-- --
--- --- --- ---
Total................................ 98 101 101 101 97 97
== === === === === ==
</TABLE>

MARKET AREA

Chicago is the nation's third largest metropolitan area, with a population
of approximately 7.7 million people and approximately 2.8 million households.
Chicago has a stable and diverse economic base which includes major
manufacturing, transportation, finance and other business centers. The
population base of Chicago is relatively young and affluent compared to the
national average and compared with other leading population centers. In addition
to its attractive demographics, the Chicago metropolitan area has had a
relatively stable economic environment with more stable inflation and
unemployment rates than many other major urban markets. According to the U.S.
Bureau of the Census, the population of suburban Chicago, where nearly 80% of
the Company's stores are located, has grown by approximately 12% since 1986.
According to a recent report issued by the U.S. Department of Commerce, by the
year 2005 the Chicago area is also expected to have a population of 8.3 million
residents and the largest increase in jobs of all of the nation's major
metropolitan areas. The Company believes that its existing market share and its
plans to add new stores will allow it to benefit from the continuing growth of
the Chicago area.

WAREHOUSING, DISTRIBUTION AND PURCHASING

The Company currently owns and operates two primary distribution facilities
with an aggregate of approximately 1.4 million square feet and a satellite
facility of approximately 285,000 square feet for storage of forward buy
inventory. Each store submits orders to the distribution facilities through a
centralized processing system, and merchandise ordered from the warehouses is
normally received at the stores the next day.

The Company's primary warehouse facility is located in Northlake, Illinois
and handles dry grocery, produce, dairy, delicatessen, meat and frozen foods. In
addition, goods prepared at the on-site commissary are cross-docked for delivery
to the stores. The Company's other primary distribution facility, a general
merchandise facility located on the south side of Chicago approximately 15 miles
from the Company's Northlake facility, handles health and beauty care products
and other general merchandise. The Company also owns and operates Ludwig Dairy,
a dairy processing plant in Dixon, Illinois (approximately 100 miles west of
Chicago) that manufactures cultured dairy products and ice cream. A satellite
facility also located in Northlake is currently used only for the storage of
forward buy products and operates at less than 10% of

28
<PAGE> 30

capacity. The Company is currently evaluating the feasibility of selling one of
its warehouse facilities and consolidating its warehousing operations in its
remaining facilities.

The stores receive prepared foods, such as salads and cooked meats, from
the Company's commissary. The commissary also distributes "Chef's Collection"
products, which offer customers restaurant-quality, fully prepared entrees for
carry-out. The commissary is operated as a profit center and charges individual
stores for its services. Management believes that the Company is the only
Chicago-area supermarket chain to operate its own commissary, which gives it
certain competitive advantages, such as higher margins on prepared food,
increased quality control and the ability to develop "signature items" not found
in other supermarkets.

Distribution is accomplished through a Company-operated fleet of tractors
and trailers. Stores are located an average of 15 miles from the principal
distribution center, with the furthest store located approximately 35 miles
away. Management believes this close proximity of the stores to the distribution
facilities results in lower distribution costs and enables the Company to
maintain lower levels of inventory and achieve more efficient warehousing than
would otherwise be possible.

The Company has historically purchased merchandise from a large number of
third party suppliers, none of which supplies a material portion of the
Company's goods and services. The Company is a party to certain exclusivity
contracts for the purchase of products from vendors. While these contracts have
become common in the food retailing industry, the Company has not historically
emphasized such contracts. The Company has begun to focus on such agreements
more aggressively since the Acquisition and is also coordinating its purchasing
efforts with other Yucaipa-managed supermarket chains in an effort to reduce its
product costs. The Company also is pursuing forward buying and secondary
sourcing opportunities. The Company actively participates in a Best Practices
program with all other Yucaipa-managed supermarket chains that is intended to
reduce costs and improve business processes. The Company believes that
additional procurement savings may be realized in the future.

ADVERTISING AND PROMOTION

The Company advertises primarily through direct mail circulars distributed
every Thursday, in addition to Sunday newspaper and radio advertisements.
Television advertising is employed around holidays and other seasonal events to
reaffirm the Company's reputation for high-quality perishables.

The Company's advertising and promotion strategy for its Dominick's stores
stresses their quality, assortment of products, customer service and competitive
prices. Since 1990, the Company has focused its Dominick's print media
advertising on direct mail, which permits highly targeted marketing and supports
the Company's store-specific merchandising goals. On average, the Company
circulates approximately 30 different versions of its Dominick's circular each
week, including eight to ten versions for stores which incorporate the Fresh
Store concept. While all store departments share portions of the weekly
circular, the Company tailors its advertisements to a particular store's trade
area and store type. Management believes direct mail allows for distribution of
the weekly advertising circular at a lower cost and provides more complete
coverage than print advertising in newspapers. The Dominick's stores also
utilize both television and radio advertising.

The Company also employs point-of-sale couponing whereby the Company
provides coupons which are printed with the customer's receipt upon purchase of
certain selected items. Manufacturers pay the Company to print a coupon for one
product when another product is purchased in order to promote complementary or
substitute products. The Company's stores also utilize this type of targeted
marketing to promote items of its choice and to obtain information about
purchasing behavior. To better facilitate the Company's target marketing
programs for its Dominick's stores, the Company is also developing a frequent
shopper card program.

The Company utilizes direct mail circulars as its primary form of
advertising for the Omni stores. By distributing multiple versions of an
advertisement, management believes the Omni stores have been successful in
targeting multiple specific demographic zones from which customers for a
particular store are drawn. Weekly circulars focus on Omni's everyday low prices
and include a variety of weekly specials to draw

29
<PAGE> 31

customers into the store. The Company circulates approximately six different
versions of the Omni circular each week.

PRIVATE LABEL PROGRAM

The Company's private label program represented 11.9% of fiscal 1995 sales
(excluding meats, service delicatessen and produce items) which is significantly
below the national average. One component of management's operating strategy is
to increase private label sales to a level closer to national averages, which
management believes will have a favorable impact on future gross margins. Gross
margins on private label goods are generally eight to ten percent higher than on
national brands, while offering comparable quality at prices that are
approximately 25% lower. Through its private label program, the Company
currently offers approximately 1,750 private label items at Dominick's stores
and approximately 800 private label items at Omni stores. By the end of calendar
1996, the Company intends to introduce the "Private Selection" label as the
premium private label at Dominick's stores. The "Private Selection" label is
owned by Ralph's Grocery Company, a Yucaipa-managed supermarket chain, and will
be licensed to the Company. The Company procures grocery, deli, meat and health
and beauty private label products through Topco Associates, Inc. ("Topco"), a
large, national food buying cooperative. In addition to its "Dominick's" and
"Omni" brand names, the Company features Topco-branded products under the
"Valutime" brand name at its Dominick's stores, under the "Kingston" and "Mega"
brand names at its Omni stores and under the "Top Care" brand name at all of its
stores.

MANAGEMENT INFORMATION AND TRAINING SYSTEMS

In 1989, the Company began modernizing its management information systems
by adopting a "multi-platform" strategy. This entailed upgrading or moving
certain applications from the mainframe to a mid-range or a micro format. The
upgrade of the Company's financial software is substantially complete, while the
upgrade of purchasing software is expected to be completed in approximately one
year. The Company has also initiated an upgrade of its warehousing system and
plans to install radio frequency technology, which will enhance warehouse space
utilization, manpower planning and store service levels. At the store level, all
point-of-sale equipment has been upgraded in the past three years at a cost in
excess of $4 million. Pharmacy terminals that keep detailed patient records and
handle third party billing adjudication have been installed and direct store
delivery receiving and time-and-attendance systems have been largely implemented
at the store level. In addition, new PC-based store-level training systems have
been configured in the Company's stores.

COMPETITION

The supermarket industry is highly competitive and characterized by narrow
profit margins. Supermarket chains generally compete on the basis of location,
quality of products, service, price, product variety and store condition. The
Company's competitors include national and regional supermarket chains,
independent and specialty grocers, drug and convenience stores, warehouse club
stores, deep discount drug stores and supercenters. The Company regularly
monitors its competitors' prices and adjusts its prices and marketing strategy
as management deems appropriate in light of existing conditions.

The Company and Jewel Food Stores ("Jewel"), a subsidiary of American
Stores, Inc., are the leading chains in the Chicago-area market. In 1995, the
Company had a market share of approximately 25.4% among Chicago-area
supermarkets, compared to Jewel which had a market share of approximately 35.6%.
The majority of the Company's other supermarket competitors are regional
supermarket chains or small independent operators, none of which has greater
than a 5% market share. The Company, through its efforts to establish the Omni
format and upgrade its Dominick's format stores, has increased its market share
from approximately 19.0% in 1989 to approximately 25.4% in 1995. A combination
of the strength of Dominick's franchise in the region and the expansion and
successful format differentiation of Omni has helped the Company increase its
market share despite the fact that a substantial number of competitive store
openings occurred in the Chicago metropolitan area between 1989 and 1995.

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<PAGE> 32

Beginning in the late 1980's and peaking in the early 1990's, a number of
non-traditional competitors opened locations in the Chicago metropolitan area.
These competitors introduced a number of new formats to the Chicago consumer,
including warehouse club stores, mass merchants and supercenters. Though the
Company has traditionally competed primarily with other supermarket chains, the
Company's business strategy has been to compete with these new entrants through
the introduction of its Omni format and continued growth of the Dominick's
combination food and drug stores.

EMPLOYEES AND LABOR RELATIONS

As of August 3, 1996, the Company employed 17,734 people, of whom
approximately 26% were full-time and 74% were part-time. The following table
sets forth additional information concerning the Company's employees.

<TABLE>
<CAPTION>
UNION NON-UNION TOTAL
------ --------- ------
<S> <C> <C> <C>
Salaried....................................... 143 890 1,033
Hourly:
Full-time.................................... 3,157 416 3,573
Part-time.................................... 12,903 225 13,128
------ ----- ------
Total..................................... 16,203 1,531 17,734
====== ===== ======
</TABLE>

Substantially all of the Company's store employees are unionized. Employees
covered by union contracts are represented by six major unions: (i) United Food
and Commercial Workers Union ("UFCW"), (ii) UFCW Union, Meat Division, (iii)
International Brotherhood of Teamsters, (iv) International Brotherhood of
Electrical Workers, (v) Automobile Mechanics Union (International Association of
Machinists and Aerospace Workers) and (vi) Chicago and Northeast Illinois
District Council of Carpenters.

The Company's contracts with its Dominick's retail clerks (covering
approximately 9,400 employees at August 3, 1996) and its Omni meatcutters
(covering approximately 550 employees at August 3, 1996) have expired and
although the Company is currently negotiating with the respective unions for
such employees, no new agreements have been reached. The Company's contract with
the Omni retail clerks has been ratified by the union and is anticipated to be
signed in the near future. The Company's contracts are generally negotiated in
three-year cycles. The Company's contract with the Dominick's meatcutters
expires in July 1997 and the Company's primary Teamsters contract expires in
March 1999. See "Risk Factors -- Labor Relations; Expired Union Contracts."

The Company has never experienced a work stoppage and considers its
relations with its employees to be good. Pursuant to their collective bargaining
agreements, Dominick's contributes to various union-sponsored, multi-employer
pension plans.

TRADE NAMES, SERVICE MARKS AND TRADEMARKS

The Company uses a variety of trade names, service marks and trademarks.
Except for "Dominick's," "Dominick's Finer Foods" and "Omni Superstores," the
Company does not believe any of such trade names, service marks or trademarks is
material to its business. The Company is presently seeking federal registration
of the "Omni Superstores" trademark, and has filed an application to renew the
federal registration for "Dominick's Finer Foods."

GOVERNMENT REGULATION

The Company is subject to regulation by a variety of governmental agencies,
including but not limited to, the U.S. Food & Drug Administration, the U.S.
Department of Agriculture, the Illinois Department of Alcoholic Beverage
Control, the Illinois Department of Agriculture, the Illinois Department of
Professional Regulation and state and local health departments and other
agencies. At present, local regulations prevent the Company from selling liquor,
or certain types of liquor, at certain of its stores.

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<PAGE> 33

ENVIRONMENTAL MATTERS

The Company is subject to federal, state and local environmental laws that
(i) govern activities or operations that may have adverse environmental effects,
such as discharges to air and water, as well as handling and disposal practices
for solid and hazardous wastes and (ii) impose liability for the costs of
cleaning up certain damages resulting from sites of past spills, disposals or
other releases of hazardous materials. The Company believes that it currently
conducts its operations, and in the past has operated its business, in
substantial compliance with applicable environmental laws. From time to time,
operations of the Company have resulted, or may result, in noncompliance with or
liability for cleanup pursuant to environmental laws. However, the Company
believes that any such noncompliance or liability under current environmental
laws would not have a material adverse effect on its results of operations and
financial condition. The Company has not incurred material capital expenditures
for environmental controls during the previous three years.

In connection with the Acquisition, the Company and Dominick's conducted
certain investigations (including in some cases, reviewing environmental reports
prepared by others) of the Company's operations and its compliance with
applicable environmental laws. The investigations, which included Phase I and
Phase II assessments and subsequent studies by independent consultants, found
that certain facilities have had or may have had releases of hazardous materials
associated with Dominick's operations or those of other current and prior
occupants that may require remediation, particularly due to releases of
hazardous materials from underground storage tanks and hydraulic equipment.
Pursuant to the Stock Purchase Agreement, the prior owners of Dominick's have
agreed, subject to certain conditions, to pay one-half of such remediation costs
up to $10 million and 75% of such remediation costs between $10 million and $20
million. Based in part on the investigations conducted and the cost-sharing
provisions of the Stock Purchase Agreement with respect to environmental
matters, the Company believes, although there can be no assurance, that its
liabilities relating to these environmental matters will not have a material
adverse effect on its future financial position or results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

PROPERTIES

The Company operates a total of 97 stores in the Chicago metropolitan area,
as described in the following table:

<TABLE>
<CAPTION>
AVERAGE SQUARE
NUMBER OF STORES FOOTAGE
-------------------------------- -------------------
OWNED LEASED TOTAL TOTAL SELLING
------- -------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Dominick's:
Conventional............................ 2 22 24 43,400 29,100
Combination food and drug............... 8 30 38 57,600 40,300
Fresh Stores............................ 0 18 18 54,300 40,600
-- -- --
------ ------
Dominick's total..................... 10 70 80 52,600 37,000
Omni...................................... 3 14 17 92,300 65,300
-- -- --
------ ------
Company total........................ 13 84 97 59,600 42,000
== == == ====== ======
</TABLE>

At its leased stores, the Company generally enters into long-term net
leases which obligate the Company to pay its proportionate share of real estate
taxes, common area maintenance charges and insurance costs. In addition, such
leases generally provide for contingent rent based upon a percentage of sales
when sales from the store exceed a certain dollar amount. The average remaining
term (including renewal options with increasing rents) of the Company's
supermarket leases is approximately 30 years. Two of the three Omni stores owned
by the Company are subject to long-term ground leases. There are mortgages on
the Company's owned stores totalling approximately $9.3 million at October 28,
1995.

The Company's administrative offices currently occupy a small portion of an
approximately 285,000 square foot facility at 505 Railroad Avenue (which also
includes a satellite distribution facility) and approximately 171,300 square
feet of space at 333 N. Northwest Avenue in Northlake, Illinois. The Company

32
<PAGE> 34

also owns and operates two primary warehouse and distribution facilities
totaling 1.4 million square feet and the Ludwig Dairy plant. See "Warehousing,
Distribution and Purchasing."

LEGAL PROCEEDINGS

On March 16, 1995, a lawsuit was filed in the United States District Court
for the Northern District of Illinois against Dominick's by two employees of
Dominick's. The plaintiffs' original complaint asserted allegations of gender
discrimination and sought compensatory and punitive damages in an unspecified
amount. The plaintiffs filed an amended complaint on May 1, 1995. The amended
complaint added four additional plaintiffs and asserted allegations of gender
and national origin discrimination. The plaintiffs filed a second amended
complaint on August 16, 1996 adding three additional plaintiffs. There are
currently several outstanding motions before the court, including the
plaintiffs' motion for class certification. The parties are conducting discovery
with respect to the pending motion for class certification. The Company plans to
vigorously defend this lawsuit. Due to the numerous legal and factual issues
which must be resolved during the course of this litigation, the Company is
unable to predict the ultimate outcome of this lawsuit. If Dominick's were held
liable for the alleged discrimination (or otherwise concludes that it is in the
Company's best interest to settle the matter), it could be required to pay
monetary damages (or settlement payments) which, depending on the outcome of the
class certification motion (and the size of any class certified), the theory of
recovery or the resolution of the plaintiffs' claims for compensatory and
punitive damages, could be substantial and could have a material adverse effect
on the Company. However, based upon the current state of the proceedings, the
Company's assessment to date of the underlying facts and circumstances and the
other information currently available, and although no assurances can be given,
the Company does not believe that the resolution of this litigation will have a
material adverse effect on the Company.

The Company, in its ordinary course of business, is party to various legal
actions. Management believes these are routine in nature and incidental to its
operations. Management believes that the outcome of any such proceedings to
which the Company currently is a party will not have a material adverse effect
upon its business, financial condition or results of operations.

33
<PAGE> 35

MANAGEMENT

The following table sets forth certain information with respect to the
members of the Board of Directors and the executive officers of the Company.
Executive officers of the Company are chosen by the Board of Directors and serve
at its discretion.

<TABLE>
<CAPTION>
NAME TITLE AGE
<S> <C> <C>
Ronald W. Burkle Chairman of the Board (l) 44
Robert A. Mariano President, Chief Executive Officer and Director (l) 46
Darren W. Karst Executive Vice President, Finance and 36
Administration, Chief Financial Officer, Secretary
and Director
Robert E. McCoy Executive Vice President of Operations 49
John W. Boyle Group Vice President -- Information Planning and 38
Store Development
Robert R. DiPiazza Group Vice President -- Perishable Merchandising 45
Donald G. Fitzgerald Group Vice President -- Non-Perishable Merchandising 35
and Logistics
Donald S. Rosanova Group Vice President -- Omni Division 47
Herbert R. Young Group Vice President -- Sales, Marketing and 55
Advertising
Peter P. Copses Director 38
Linda McLoughlin Figel Director 32
Patrick L. Graham Director (1) 47
David B. Kaplan Director 29
Mark A. Resnik Director 49
Antony P. Ressler Director 35
</TABLE>

- ------------------------------

(1) Member of the Executive Committee of the Board of Directors.

In accordance with the terms of the Company's Amended and Restated
Certificate of Incorporation, effective upon the closing of the Offering, the
terms of office of the Board of Directors will be divided into three classes:
Class I, Class II and Class III. The terms of office of the respective classes
of directors will be as follows: Class I will expire at the annual meeting of
stockholders to be held in 1998; Class II will expire at the annual meeting of
stockholders to be held in 1999; and Class III will expire at the annual meeting
of stockholders to be held in 2000. At each annual meeting of stockholders
beginning in 1998, the successors to directors whose terms will then expire will
be elected to serve from the time of election and qualification until the third
annual meeting following election and until successors have been duly elected
and have qualified. In addition, the Company's Amended and Restated Certificate
of Incorporation provides that the authorized number of directors may be changed
only by resolution of the Board of Directors. Any additional directorships
resulting from an increase in the number of directors will be distributed among
the three classes so that, as nearly as possible, each class will consist of
one-third of the directors. Although directors of the Company may be removed for
cause by the affirmative vote of the holders of a majority of the Common Stock,
the Company's Amended and Restated Certificate of Incorporation provides that
holders of 66 2/3% of the Common Stock must vote to approve the removal of a
director without cause.

The Company has undertaken to appoint an additional director who is not
affiliated with the Company or its principal stockholders promptly following the
consummation of the Offering. The Company has also undertaken to appoint a
second director who is not affiliated with the Company or its principal
stockholders within one year following the consummation of the Offering. Such
persons have not yet been identified. The Board of Directors has an Executive
Committee and intends to establish a Compensation Committee and an Audit
Committee. There are no family relationships among the executive officers or
Directors of the Company.

Pursuant to the Stockholders Agreement among the Company, certain
affiliates of Yucaipa and Apollo and certain other stockholders of the Company,
six of the Company's current directors were selected by Yucaipa and three were
selected by Apollo. Following the consummation of the Offering, Yucaipa and
Apollo

34
<PAGE> 36

will continue to be able to nominate six and three directors, respectively,
provided that certain beneficial ownership requirements set forth in the
Stockholders Agreement continue to be met. See "Description of Capital
Stock -- Stockholders Agreements."

Historically the Company has not paid any compensation to its directors for
serving on the Board, but has reimbursed such persons for their out-of-pocket
expenses incurred in connection with attending meetings of the Board of
Directors. Following the consummation of the Offering, the Company intends to
pay customary fees to its outside directors for service on the Board, and the
Company anticipates that it will reimburse directors for their out-of-pocket
expenses incurred in connection with attending meetings of the Board of
Directors.

RONALD W. BURKLE -- Mr. Burkle has been the Chairman of the Company since
March 1995 and served as Chief Executive Officer from March 1995 to January
1996. Mr. Burkle co-founded Yucaipa in 1986 and has served as director and
Chairman of the Board of Food 4 Less Holdings, Inc. ("Food 4 Less") whose
principal operating subsidiary is Ralphs Grocery Company, and Chairman of the
Board and Chief Executive Officer of its predecessor, Food 4 Less Supermarkets,
Inc. since 1987. Mr. Burkle has been a director and the Chief Executive Officer
of Smith's Food & Drug Centers, Inc. ("Smith's") since May 1996 and was Chairman
of the Board of Smitty's Supermarkets, Inc. ("Smitty's") from 1994 until its
merger into Smith's in May 1996. Mr. Burkle also serves as a director of Kaufman
and Broad Home Corporation. Before founding Yucaipa, Mr. Burkle held a number of
supermarket executive positions and was a private investor in Southern
California.

ROBERT A. MARIANO -- Mr. Mariano has been the President and a director of
the Company since March 1995 and Chief Executive Officer since January 1996. Mr.
Mariano also served as Chief Operating Officer from March 1995 until January
1996. Mr. Mariano joined the Company in 1972 and was Senior Vice President of
Marketing and Merchandising from 1994 to 1995, Senior Vice President of
Perishable Merchandising from 1989 to 1994, Senior Vice President of Operations
from 1987 to 1989, and held a number of managerial positions prior to 1987.

DARREN W. KARST -- Mr. Karst joined the Company in March 1995 as Senior
Vice President, Chief Financial Officer, Secretary and a director and was
appointed Executive Vice President, Finance and Administration in March 1996.
Mr. Karst joined Yucaipa in 1988 and has been a general partner since 1991.
Prior to 1988, he was a manager at Ernst & Young LLP.

ROBERT E. MCCOY -- Mr. McCoy has been Executive Vice President of
Operations of the Company since 1996 and served as Senior Vice President of
Operations from 1989 to 1996. Prior to that time, he was Vice President of
Operations at Jewel, where he began his career in 1969.

JOHN W. BOYLE -- Mr. Boyle has been Group Vice President -- Information
Planning and Store Development of the Company since March 1996. Mr. Boyle joined
the Company in January 1995 as Vice President -- Management Information Systems
and became Vice President -- Administration in March 1995. Prior to joining the
Company, Mr. Boyle had been employed as Vice President -- Information Systems at
Food 4 Less Supermarkets, Inc. since 1993, and, before that, had been employed
as a Senior Vice President at Thrifty Drugstores.

ROBERT R. DIPIAZZA -- Mr. DiPiazza has been Group Vice
President -- Perishable Merchandising since March 1996, and, prior to that, had
served as Vice President -- Produce Operations since 1990. Before 1990, Mr.
DiPiazza held a number of other managerial positions at the Company.

DONALD G. FITZGERALD -- Mr. Fitzgerald has been Group Vice
President -- Non-Perishable Merchandising and Logistics since March 1996. Prior
to that time Mr. Fitzgerald had served as Vice President -- Grocery
Merchandising since 1994, as a director of grocery merchandising from 1993 to
1994 and as director of grocery purchasing since 1990. Before 1990 Mr.
Fitzgerald held several other managerial positions at the Company.

DONALD S. ROSANOVA -- Mr. Rosanova has been Group Vice President -- Omni
since March 1996, and, prior to that, had been Vice President -- Distribution
and Transportation since 1992. Before 1992 Mr. Rosanova held several other
managerial positions at the Company.

35
<PAGE> 37

HERBERT R. YOUNG -- Mr. Young has been Group Vice President -- Sales,
Marketing and Advertising of the Company since March 1996 and served as Senior
Vice President of Marketing from March 1995 to 1996. Prior to that time, Mr.
Young was Senior Vice President and General Manager of Omni from 1994 to 1995
and was Senior Vice President of Marketing and Non-Perishable Merchandising from
1990 to 1994. Before joining the Company, he was Executive Vice President of
Topco from 1986 to 1990.

PETER P. COPSES -- Mr. Copses has served as a director of the Company since
March 1995. Mr. Copses also has served as a director of Food 4 Less and Ralphs
since 1995. Since 1990, Mr. Copses has been a limited partner of Apollo
Advisors, L.P. which, together with an affiliate, serves as the managing general
partner of Apollo Investment Fund, L.P., AIF II, L.P., and Apollo Investment
Fund III, L.P., which are private securities investment funds, and of Lion
Advisors, L.P., which acts as financial advisor to and representative for
certain institutional investors with respect to securities investments. From
March to September 1990, Mr. Copses was a Vice President in the investment
banking department of Donaldson, Lufkin & Jenrette Securities Corporation. Prior
to 1990, he was employed by Drexel Burnham Lambert Incorporated. Mr. Copses is a
director of Family Restaurants, Inc. and Zale Corporation.

LINDA MCLOUGHLIN FIGEL -- Ms. Figel has been a director of the Company
since August 1996. Ms. Figel also has served as a director of Smith's since May
1996. She joined Yucaipa in 1989 and became a general partner in 1991. Prior to
1989, she was employed by Bankers Trust Company in its Structured Finance Group.

PATRICK L. GRAHAM -- Mr. Graham has served as a director of the Company
since March 1995. Mr. Graham has served as a director of Food 4 Less and Ralphs
since 1995 and served as Vice President and a director of Smitty's from June
1994 until its merger with Smith's in May 1996. Mr. Graham joined Yucaipa as a
general partner in 1993. Prior to that time he was a Managing Director in the
corporate finance department of Libra Investments, Inc. from 1992 to 1993 and
PaineWebber Inc. from 1990 to 1992. Prior to 1990, he was a Managing Director in
the corporate finance department of Drexel Burnham Lambert Incorporated.

DAVID B. KAPLAN -- Mr. Kaplan has served as a director of the Company since
March 1995. Since 1991, Mr. Kaplan has been associated with and is a limited
partner of Apollo Advisors, L.P. and Lion Advisors, L.P. Prior to 1991, Mr.
Kaplan was a member of the corporate finance department of Donaldson, Lufkin &
Jenrette Securities Corporation. Mr. Kaplan also serves as a director of PRI
Holdings, Inc. and BDK Holdings, Inc.

MARK A. RESNIK -- Mr. Resnik has served as a director of the Company since
March 1995. Mr. Resnik co-founded Yucaipa in 1986, and has served as a director
of Food 4 Less and Ralphs since 1995 and as a director and Vice President of its
predecessor, Food 4 Less Supermarkets, Inc., since 1987. Mr. Resnik served as
Vice President and a director of Smitty's from June 1994 until its merger with
Smith's in May 1996. From 1986 until 1988, Mr. Resnik served as a director and
Vice President of Jurgensen's.

ANTONY P. RESSLER -- Mr. Ressler has served as a director of the Company
since March 1995. In 1990, Mr. Ressler was one of the founding principals of
Apollo Advisors, L.P. and Lion Advisors, L.P. Prior to 1990, Mr. Ressler was a
Senior Vice President in the high yield bond department of Drexel Burnham
Lambert Incorporated. Mr. Ressler is a director of Family Restaurants, Inc.,
United International Holdings, Vail Resorts, Inc. and PRI Holdings, Inc.

All of the directors named above also serve on the board of directors of
Dominick's.

36
<PAGE> 38

SUMMARY COMPENSATION TABLE

The following Summary Compensation Table sets forth information concerning
the compensation of the Chief Executive Officer and the other four most highly
compensated executive officers of the Company (the "Named Executive Officers"),
whose total annual salary and bonus for the 52 weeks ended October 28, 1995
exceeded $100,000 for services rendered in all capacities to the Company and its
subsidiaries for the same period.

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION(2)
---------------
ANNUAL COMPENSATION SECURITIES
UNDERLYING
FISCAL YEAR -------------------- OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION(1) ENDED SALARY($) BONUS($) SARS(#) COMPENSATION($)
---------------- -------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Ronald W. Burkle(3)(4) October 28, 1995 $ -- $ -- -- $ --
Chairman October 29, 1994 -- -- -- --
October 30, 1993 -- -- -- --
Robert A. Mariano(5) October 28, 1995 $334,159 $216,000 146,379 $3,463,718(6)(7)
President and October 29, 1994 216,000 216,000 -- 22,414(6)
Chief Executive Officer October 30, 1993 181,102 23,567 -- 20,631(6)
Darren W. Karst(8) October 28, 1995 $151,570 $ -- 73,189 $ 1,671(9)
Executive Vice President, October 29, 1994 -- -- -- --
Finance and Administration, October 30, 1993 -- -- -- --
Chief Financial Officer and Secretary
Robert E. McCoy October 28, 1995 $236,923 $216,000 146,379 $2,916,273(7)(9)
Executive Vice President October 29, 1994 216,000 216,000 -- 14,484(7)
of Operations October 30, 1993 176,094 21,945 -- 3,777(7)
Herbert R. Young October 28, 1995 $225,617 $210,927 146,379 $2,923,026(7)(9)
Group Vice President October 29, 1994 210,927 210,927 -- 21,045(7)
of Sales, Marketing and October 30, 1993 204,783 17,021 -- 7,620(7)
Administration
</TABLE>

- ------------------------------

(1) Does not include compensation with respect to one executive officer of the
Predecessor Company whose employment was terminated at the time of the
Acquisition.

(2) Information for Messrs. Mariano, McCoy and Young excludes equity-based
compensation of the Predecessor Company which was extinguished in connection
with the Acquisition.

(3) Mr. Burkle provides services to the Company pursuant to the consulting
agreement between Yucaipa and the Company. See "Certain Transactions."
Pursuant to the consulting agreement, the Company paid Yucaipa $1.5 million
in the 32 weeks ended October 28, 1995 for the services of Messrs. Burkle,
Resnik, Graham and other Yucaipa personnel. Such payments to Yucaipa are not
reflected in the table set forth above.

(4) Mr. Burkle served as Chairman and Chief Executive Officer from March 1995 to
January 1996.

(5) Mr. Mariano was appointed President and Chief Operating Officer in March
1995 and was subsequently appointed Chief Executive Officer in January 1996.

(6) Includes (i) insurance premiums paid under senior management benefit plans,
(ii) benefits paid under a senior management financial planning plan, (iii)
profit sharing plan contributions made by the Company, (iv) other employee
benefits and (v) for Mr. Mariano, interest forgiven on a promissory note.
The respective amount paid for Messrs. Mariano, McCoy and Young,
respectively, are as follows: (A) insurance premiums: $3,394, $2,612, $5,820
for 1995; $3,394, $2,612, $5,820 for 1994; none in 1993, (B) financial
planning benefits: $0, $8,000, $8,000 for 1995; $0, $8,000, $8,000 for 1994;
none in 1993, (C) forgiven interest: $2,633, $0, $0 for 1995; $12,014, $0,
$0 for 1994; $12,014, $0, $0 for 1993, (D) profit sharing contributions:
$3,288, $3,288, $3,288 for 1995; $2,824, $2,824, $2,824 for 1994; $4,690,
$2,724, $3,162 for 1993; and (E) other benefits: $4,310, $913, $4,458 for
1995; $4,182, $1,048, $4,401 for 1994; $3,927, $1,053, $4,458 for 1993.

(7) Includes the redemption for cash of all Predecessor Company SARs held by
Messrs. Mariano, McCoy and Young at the time of the Acquisition in the
amounts of $3,450,093, $2,901,460, and $2,901,460, respectively.

(8) Mr. Karst joined the Company as Senior Vice President, Chief Financial
Officer and Secretary in March 1995 and was appointed Executive Vice
President, Finance and Administration in March 1996.

(9) Includes employee benefits of $1,671.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company does not have a board committee performing the functions of a
compensation committee. Ronald W. Burkle, the Chairman of the Board and Chief
Executive Officer of the Company during fiscal 1995, and Robert A. Mariano, the
President and Chief Operating Officer of the Company during fiscal 1995, made
decisions with regard to executive officer compensation for fiscal 1995.

37
<PAGE> 39

EMPLOYMENT AGREEMENTS

Concurrently with the consummation of the Acquisition, Dominick's entered
into new employment agreements with certain executive officers. All rights of
such executive officers under their previous employment agreements, including
all rights to receive severance benefits upon a change of control of Dominick's,
terminated at the closing of the Acquisition in consideration of the new
employment agreements described below.

Mariano Employment Agreement. Dominick's and Mr. Mariano entered into a
three-year employment agreement dated March 22, 1995 pursuant to which Mr.
Mariano was employed as President and Chief Operating Officer (or such other
offices as Dominick's board of directors may designate) at an annual base salary
of $400,000 (subject to increases at the discretion of the board). In January
1996, the board of directors appointed Mr. Mariano to the office of Chief
Executive Officer and raised his annual base salary to $500,000. If Dominick's
meets certain financial targets determined by its board of directors, Mr.
Mariano will also be entitled to receive an annual incentive bonus not to exceed
200% of his annual base salary. Mr. Mariano is eligible to participate in
employee benefit plans generally made available by Dominick's to its executive
officers. At the closing of the Acquisition, Mr. Mariano received a payment of
$864,000 in consideration of the cancellation of certain rights under his prior
employment agreement. Concurrently with the closing of the Acquisition, Mr.
Mariano exchanged 1,200 shares of Dominick's common stock for 190,293 shares of
Common Stock of the Company in a tax-deferred transaction. The employment
agreement may be terminated by either party upon 30 days' notice for any reason,
or immediately by Dominick's for cause. If during the term of the employment
contract, Mr. Mariano resigns or his employment is terminated by Dominick's for
any reason other than for cause, he will be entitled to receive a cash payment
equal to three times his annual base salary, less $864,000, and maintenance at
Dominicks's expense of medical, dental and other benefits for 24 months
following such employment termination.

McCoy Employment Agreement. Dominick's and Mr. McCoy entered into a
three-year employment agreement dated March 22, 1995 pursuant to which Mr. McCoy
was employed at an annual base salary of $250,000. In March 1996, the board of
directors appointed Mr. McCoy to Executive Vice President of Operations and
raised his annual base salary to $300,000. Mr. McCoy is also entitled to receive
an annual incentive bonus, not to exceed 100% of base salary, if Dominick's
meets certain financial targets determined by its board of directors. Mr. McCoy
is entitled to participate in employee benefit plans generally made available by
Dominick's to its executive officers. The employment agreement may be terminated
by either Dominick's or Mr. McCoy upon 30 days' notice for any reason, or
immediately by Dominick's for cause. In consideration of the cancellation of
certain rights under his prior employment agreement, Mr. McCoy received a
payment of $864,000 on March 22, 1996. If Mr. McCoy resigns or his employment is
terminated by Dominick's other than for cause, he is entitled to receive the
discounted present value of the aggregate base salary for the remaining term of
the employment agreement less $864,000, plus the maximum bonus payable in the
year of termination. Unless terminated for cause, Mr. McCoy is also entitled to
continue to receive medical, dental and other employee benefits for the full
three-year term of the employment agreement.

Young Employment Agreement. Dominick's and Mr. Young entered into a
three-year employment agreement dated March 22, 1995 pursuant to which Mr. Young
is employed at an annual base salary of $225,000. Mr. Young is also entitled to
receive an annual incentive bonus, not to exceed 100% of base salary, if
Dominick's meets certain financial targets determined by its board of directors.
Mr. Young is also entitled to participate in employee benefit plans generally
made available by Dominick's to its executive officers. The employment agreement
may be terminated by Dominick's or Mr. Young upon 30 days' notice for any
reason, or immediately by Dominick's for cause. In consideration of the
cancellation of certain rights under his prior employment agreement, Mr. Young
received a payment of $843,708 on March 22, 1996. In the event Mr. Young resigns
or is terminated other than for cause, he is entitled to receive the discounted
present value of the aggregate base salary for the remaining term of the
employment agreement less $843,708, plus the maximum bonus payable in the year
of termination. Unless terminated for cause, Mr. Young will also continue to
receive medical, dental and other employee benefits for the full three-year term
of the employment agreement.

38
<PAGE> 40

FORMER SENIOR MANAGEMENT LONG TERM INCENTIVE PLAN

Prior to the consummation of the Acquisition, the Predecessor Company
maintained a Senior Management Long Term Incentive Plan which awarded SARs to
certain senior executives based upon the individual's length of tenure at the
Predecessor Company and the annual performance of both the individual and the
Predecessor Company. Prior to the consummation of the Acquisition, the
Predecessor Company had approximately 20,800 SARs outstanding, which were held
by 18 current and former officers of the Predecessor Company, including Messrs.
Mariano, McCoy and Young.

Concurrently with the consummation of the Acquisition, approximately $29.5
million of outstanding SARs were redeemed for cash. An additional $2.6 million
of SARs payments that would otherwise have been payable upon consummation of the
Acquisition were cancelled in exchange for the issuance of the Reinvestment
Options (as defined). See "-- 1995 Stock Option Plan."

1995 STOCK OPTION PLAN

On March 19, 1995, the Company adopted the 1995 Stock Option Plan (as
amended, the "1995 Stock Option Plan"), designed to motivate certain executives
to remain in the employ of the Company and to focus their efforts on long-term
financial objectives. Under the 1995 Stock Option Plan, the Company may, from
time to time, grant incentive stock options or nonqualifying options to officers
and other key employees of the Company or its subsidiaries upon the terms,
conditions and provisions of the 1995 Stock Option Plan. Options to purchase a
total of 966,835 shares of Common Stock have been granted under the 1995 Stock
Option Plan and the Company does not intend to grant any additional options
thereunder. Concurrently with the consummation of the Acquisition, the Company
granted each of Messrs. Mariano, McCoy and Young options with a term of ten
years, exercisable for 146,379 shares of Common Stock representing an aggregate
of 1% of the Common Stock and Class B Common Stock outstanding as of the
consummation of the Acquisition. In the case of Mr. Mariano, such options vest
20% per year over five years beginning one year from the date of grant, with an
exercise price equal to $6.83 per share. Messrs. McCoy and Young each received
Reinvestment Options (as defined below) to purchase 97,591 shares of Common
Stock at an exercise price of $1.71 per share which were fully vested and
exercisable on the date of grant, and additional options to purchase 48,788
shares of Common Stock at an exercise price of $6.83 per share which vest 25%
per year over four years beginning two years from the date of grant. Together,
such options entitle each of Messrs. McCoy and Young to purchase 146,379 shares
of Common Stock for an aggregate purchase price of $500,000.

Upon the consummation of the Acquisition, options representing an aggregate
of 2.6% of the total equity of the Company outstanding at such time were issued
to holders of SARs in exchange for the cancellation of approximately $2.6
million of the SARs payments which would otherwise have been payable upon
consummation of the Acquisition (the "Reinvestment Options"). The value of the
SARs payments cancelled were credited against the exercise price for each
Reinvestment Option. The Reinvestment Options were fully vested upon issuance
and are immediately exercisable.

1996 EQUITY PARTICIPATION PLAN

Prior to the consummation of the Offering, it is anticipated that the
Company will adopt the 1996 Equity Participation Plan (the "1996 Equity
Participation Plan") to enable key executive officers, other key employees,
independent directors and consultants of the Company to participate in the
ownership of the Company. The 1996 Equity Participation Plan is designed to
attract and retain executive officers, other key employees, independent
directors and consultants of the Company and to provide incentives to such
persons to maximize the Company's cash flow available for distribution. The 1996
Equity Participation Plan provides for the award to executive officers, other
key employees, independent directors and consultants of the Company of a broad
variety of stock-based compensation alternatives such as nonqualified stock
options, incentive stock options, restricted stock, stock appreciation rights,
performance awards, dividend equivalents and stock payments and provides for the
grant to executive officers, other key employees, independent directors and
consultants of nonqualified stock options. Awards under the 1996 Equity
Participation Plan may provide participants with rights to acquire shares of
Common Stock.

39
<PAGE> 41

The 1996 Equity Participation Plan will be administered by the Board of
Directors (or a Compensation Committee which the Board of Directors may
establish), which is authorized to select from among the eligible participants
the individuals to whom options, restricted stock purchase rights, stock
appreciation rights, performance awards, dividend equivalents and stock payments
are to be granted and to determine the number of shares to be subject thereto
and the terms and conditions thereof. The members of the Board of Directors (or
Compensation Committee, if any) who are not affiliated with the Company will
select from among the eligible participants the individuals to whom nonqualified
stock options are to be granted, except as set forth below, and will determine
the number of shares to be subject thereto and the terms and conditions thereof.
The Board of Directors (or Compensation Committee, if any) is also authorized to
adopt, amend and rescind rules relating to the administration of the 1996 Stock
Option Plan.

Nonqualified Stock Options will provide for the right to purchase Common
Stock at a specified price which may be less than fair market value on the date
of grant (but not less than par value), and usually will become exercisable in
installments after the grant date. Nonqualified stock options may be granted for
any reasonable term.

Incentive Stock Options will be designed to comply with the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), and will be subject
to restrictions contained in the Code, including exercise prices equal to at
least 100% of the fair market value of Common Stock on the grant date and a ten
year restriction on their term, but may be subsequently modified to disqualify
them from treatment as an incentive stock option.

Restricted Stock may be sold to participants at various prices (but not
below par value) and made subject to such restrictions as may be determined by
the Board of Directors (or Compensation Committee, if any). Restricted stock,
typically, may be repurchased by the Company at the original purchase price if
the conditions or restrictions are not met. In general, restricted stock may not
be sold, or otherwise transferred or hypothecated, until restrictions are
removed or expire. Purchasers of restricted stock, unlike recipients of options,
will have voting rights and will receive dividends prior to the time when the
restrictions lapse.

Stock Appreciation Rights may be granted in connection with stock options
or other awards, or separately. SARs granted by the Board of Directors (or
Compensation Committee, if any) in connection with stock options or other awards
typically will provide for payments to the holder based upon increases in the
price of the Common Stock over the exercise price of the related option or other
awards, but alternatively may be based upon criteria such as book value. Except
as required by Section 162(m) of the Code with respect to an SAR intended to
qualify as performance-based compensation as described in Section 162(m)(4)(C)
of the Code, there are no restrictions specified in the 1996 Equity
Participation Plan on the exercise of SARs or the amount of gain realizable
therefrom, although restrictions may be imposed by the Board of Directors (or
Compensation Committee, if any) in the SAR agreements. The Board of Directors
(or Compensation Committee, if any) may elect to pay SARs in cash or in Common
Stock or in a combination of both.

Performance Awards may be granted by the Board of Directors (or
Compensation Committee, if any) on an individual or group basis. Generally,
these awards will be based upon specific agreements and may be paid in cash or
in Common Stock. Performance awards may include "phantom" stock awards that
provide for payments based upon increases in the price of the Common Stock over
a predetermined period. Performance awards may also include bonuses which may be
granted by the Board of Directors (or Compensation Committee, if any) on an
individual or group basis and which my be payable in cash or in Common Stock or
in a combination of cash and Common Stock.

Dividend Equivalents represent the value of the dividends per share paid by
the Company, calculated with reference to the number of shares covered by the
stock options, SARs or other awards held by the participant.

Stock Payments may be authorized by the Board of Directors (or Compensation
Committee, if any) in the form of shares of Common Stock or an option or other
right to purchase Common Stock as part of a deferred compensation arrangement in
lieu of all or any part of compensation, including bonuses, that would otherwise
be payable in cash to the key employee or consultant.

40
<PAGE> 42

A maximum of 1,000,000 shares will be reserved for issuance under the 1996
Equity Participation Plan.

OPTION GRANTS TABLE

The following Option Grants Table sets forth, as to the Named Executive
Officers, certain information relating to stock options granted during the
fiscal year ended October 28, 1995.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM (4)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------------------
NAME GRANTED (#) FISCAL YEAR (1) ($/SHARE) DATE (2) 0% ($)(3) 5% ($) 10% ($)
----------- --------------- ----------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald W. Burkle........ -- -- -- -- -- -- --
Robert A. Mariano....... 146,379 15.4% $6.83 3/2005 -- $628,895 $1,593,742
Darren W. Karst......... 73,190 7.7% $6.83 3/2005 -- 314,447 796,871
Robert E. McCoy......... 97,591 10.3% $1.71 3/2005 $500,000 919,309 1,562,573
48,788 5.1% $6.83 3/2005 -- 209,610 531,194
Herbert R. Young........ 97,591 10.3% $1.71 3/2005 500,000 919,309 1,562,573
48,788 5.1% $6.83 3/2005 -- 209,610 531,194
</TABLE>

- ------------------------------

(1) The total number of shares of Common Stock subject to options granted to
employees in the fiscal year ended October 28, 1995 was 950,379.

(2) Options may terminate before their expiration date if the optionee's status
as an employee or consultant is terminated or upon such optionee's death.

(3) Based upon the fair market value of the Common Stock on the grant date, as
determined in good faith by the Board of Directors.

(4) The 5% and 10% assumed annual compound rates of stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
prices. There can be no assurance that the amounts reflected in this table
will be achieved.

YEAR-END OPTION VALUE TABLE

No Named Executive Officer exercised stock options during the fiscal year
ended October 28, 1995. The following table sets forth certain information
concerning the number of stock options held by the Named Executive Officers as
of October 28, 1995, and the value (based on the fair market value of a share of
stock at fiscal year-end) of in-the-money options outstanding as of such date.

<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT OCTOBER 28, 1995 AT OCTOBER 28, 1995(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ronald W. Burkle................................. -- -- -- --
Robert A. Mariano................................ 29,276 117,103 -- --
Darren W. Karst.................................. 14,638 58,552 -- --
Robert E. McCoy.................................. 97,591 48,788 $ 500,000 --
Herbert R. Young................................. 97,591 48,788 $ 500,000 --
</TABLE>

- ------------------------------

(1) Value is based upon the fair market value of the Common Stock at October 28,
1995 minus the exercise price (the "Fair Market Value"). Fair Market Value
has been determined in good faith by the Board of Directors.

SENIOR MANAGEMENT SHORT TERM DISABILITY PLAN

The Company maintains a Short Term Disability Plan ("STD Plan") for its
senior management. Under the STD Plan, an eligible employee who is disabled will
receive payments equal to either 66.67% or 100% of base salary, depending upon
the length of service with the Company, for a period of up to 26 weeks. An
eligible employee is considered disabled if, as a result of injury, covered
illness or pregnancy, the employee is unable to perform the duties of the
officer's regular occupation.

SENIOR MANAGEMENT LONG TERM DISABILITY PLAN

The Company maintains a Long Term Disability Plan ("LTD Plan") for its
senior management, which is designed to provide salary continuation beyond the
coverage extended through the STD Plan. Under the LTD Plan, an eligible employee
who is disabled for 180 days will receive monthly payments equal to 60% of the
employee's monthly earnings (base salary plus bonus), not to exceed a maximum of
$30,000 per month, for the benefit duration specified in the LTD Plan. An
eligible employee is considered disabled if, as a result of injury or illness
for which the employee is under a doctor's care, the employee cannot perform all
of the material and substantial duties of the employee's regular occupation.

41
<PAGE> 43

PRINCIPAL AND SELLING STOCKHOLDERS

The Company's authorized common equity consists of Common Stock and Class B
Common Stock (together, the "Company Common Stock"). Except as otherwise
described herein, all shares of Common Stock and Class B Common Stock are
identical and entitle the holders thereof to the same rights and privileges
(except with respect to voting privileges). Holders of Class B Common Stock may
elect at any time to convert any or all of such shares into Common Stock, on a
share-for-share basis, to the extent the holder thereof is not prohibited from
owning additional voting securities by virtue of regulatory restrictions. The
holders of Common Stock are entitled to one vote per share on all matters to be
voted upon by the stockholders of the Company. Except as required by law,
holders of Class B Common Stock do not have the right to vote on any matters to
be voted upon by the stockholders.

The following table sets forth, as of October 1, 1996, the ownership of
Company Common Stock by (i) each person known by the Company to be the owner of
5% or more of the Company Common Stock, (ii) by each person who is a director or
Named Executive Officer of the Company, (iii) by all directors and executive
officers of the Company as a group and (iv) by each Selling Stockholder.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1) NUMBER OF AFTER OFFERING
---------------------- SHARES ----------------------
NUMBER OF BEING NUMBER OF
SHARES PERCENT OFFERED SHARES PERCENT
--------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
DIRECTORS, OFFICERS AND 5%
STOCKHOLDERS:
Yucaipa and affiliates:
Yucaipa Blackhawk Partners, L.P. .... 2,018,106 13.1% -- 2,018,106 9.4%
Yucaipa Chicago Partners, L.P. ...... 253,470 1.6 -- 253,470 1.2
Yucaipa Dominick's Partners, L.P. ... 663,333 4.3 -- 663,333 3.1
The Yucaipa Companies(2)............. -- -- -- -- --
Yucaipa Management L.L.C.(3)......... -- -- -- -- --
Ronald W. Burkle(4).................. 2,934,909 19.0 -- 2,934,909 13.7
Linda McLoughlin Figel(2)(5)......... -- -- -- -- --
Patrick L. Graham(2)(6).............. -- -- -- -- --
Darren W. Karst(2)(7)................ 14,637 * -- 14,367 *
Mark A. Resnik(2)(8)................. -- -- -- -- --
Total........................ 2,949,546 19.0 -- 2,949,546 13.8
Robert A. Mariano(9)................... 219,568 1.4 -- 219,568 1.0
Robert E. McCoy(10).................... 97,591 * -- 97,591 *
Herbert R. Young(11)................... 97,591 * -- 97,591 *
Apollo and affiliates:
Peter P. Copses(12).................. 5,855,181 37.9 -- 5,855,181 13.7
David B. Kaplan(12).................. 5,855,181 37.9 -- 5,855,181 13.7
Antony P. Ressler(12)................ 5,855,181 37.9 -- 5,855,181 13.7
Apollo Investment Fund, L.P. ........ 2,927,591 18.9 -- 2,927,591 13.7
Apollo Investment Fund III, L.P. .... 2,668,412 17.3 -- 2,668,412 12.5
Apollo Overseas Partners III,
L.P. ............................. 160,036 1.0 -- 160,036 *
Apollo (U.K.) Partners III, L.P. .... 99,142 * -- 99,142 *
Total (13)................... 5,855,181 37.9 -- 5,855,181 27.4
BT Investment Partners, Inc.(14)(15)... 1,332,054 8.6 107,354 1,224,700 5.7
Bankers Trust New York
Corporation(14)(15).................. 193,733 1.3 15,613 178,120 *
Chase Manhattan Investment
Holdings, Inc.(15)(16)............... 2,272,996 14.7 183,187 2,089,809 9.8
All directors and executive officers as
a group (15 persons)................. 9,219,477 58.7 -- 9,219,477 42.7
</TABLE>

42
<PAGE> 44

- ------------------------------

* Less than 1.0%.

(1) Except as otherwise indicated, each beneficial owner has the sole power to
vote, as applicable, and to dispose of all shares of Company Common Stock
owned by such beneficial owner.

(2) Share amounts and percentages for Yucaipa do not include shares issuable
upon exercise of the Yucaipa Warrant, which will become exercisable upon
consummation of the Offering and will entitle Yucaipa to purchase 3,874,492
shares of Common Stock (less a number of shares equal to the aggregate
exercise price, if exercised on a cashless basis) at an exercise price of
$20.73 per share. See "Description of Capital Stock -- Yucaipa Warrant."
Yucaipa is controlled by Ronald W. Burkle. The address of Yucaipa is 10000
Santa Monica Blvd., Los Angeles, California 90067. Ms. Figel and Messrs.
Graham, Karst and Resnik disclaim beneficial ownership of any shares of
Common Stock issuable upon exercise of the Yucaipa Warrant.

(3) Yucaipa Management L.L.C. is a Delaware limited liability company
controlled by Ronald W. Burkle. Yucaipa Management L.L.C. is the sole
general partner of Yucaipa Blackhawk Partners, L.P., Yucaipa Chicago
Partners, L.P., and Yucaipa Dominick's Partners, L.P., which own 2,018,106,
253,470 and 663,333 shares of Common Stock, respectively. The foregoing
limited partnerships are parties to the Stockholders Agreement with certain
other stockholders which gives Yucaipa Management L.L.C. the right to elect
a majority of the directors of the Company. See "Description of Capital
Stock -- Stockholders Agreements." Certain of the limited partners of
Yucaipa Chicago Partners, L.P. are employees of Donaldson, Lufkin &
Jenrette Securities Corporation and its affiliates. In the aggregate, the
proportionate ownership of such employees represents less than 1% of the
outstanding Common Stock.

(4) Represents shares owned by Yucaipa Blackhawk Partners, L.P., Yucaipa
Chicago Partners, L.P., and Yucaipa Dominick's Partners, L.P. These
entities are affiliated partnerships controlled indirectly by Ronald W.
Burkle. Mr. Burkle is the controlling general partner of The Yucaipa
Companies and the controlling managing member of Yucaipa Management L.L.C.
See notes (2) and (3).

(5) Ms. Figel is a general partner of The Yucaipa Companies and a limited
partner of Yucaipa Dominick's Partners, L.P. See notes (2) and (3).

(6) Mr. Graham is a general partner of The Yucaipa Companies and a limited
partner of Yucaipa Blackhawk Partners, L.P. See notes (2) and (3).

(7) Excludes options for 58,552 shares which are not exercisable within 60
days. Mr. Karst is a general partner of The Yucaipa Companies and a limited
partner of Yucaipa Blackhawk Partners, L.P. See notes (2) and (3).

(8) Mr. Resnik is a general partner of The Yucaipa Companies, a member of
Yucaipa Management L.L.C. and a limited partner of Yucaipa Blackhawk
Partners, L.P. See notes (2) and (3).

(9) Excludes options for 117,103 shares which are not exercisable within 60
days.

(10) Excludes options for 48,788 shares which are not exercisable within 60
days.

(11) Excludes options for 48,788 shares which are not exercisable within 60
days.

(12) The shares reported for each of Messrs. Copses, Kaplan and Ressler are
beneficially owned by Apollo Investment Fund, L.P., Apollo Investment Fund
III, L.P., Apollo Overseas Partners III, L.P. or Apollo (U.K.) Partners
III, L.P. (collectively, the "Apollo Funds"). Messrs. Copses, Kaplan and
Ressler are associated with Apollo Advisors, L.P. and Apollo Advisors II,
L.P., (collectively, "Advisors"), the managing general partners of the
Apollo Funds. See "Management." Messrs. Copses, Kaplan and Ressler disclaim
beneficial ownership of the Common Stock and the Class B Common Stock held
by the Apollo Funds.

(13) The address of Advisors is 2 Manhattanville Road, Purchase, New York 10577.

(14) The address of BT Investment Partners, Inc. and Bankers Trust New York
Corporation is 130 Liberty Street, New York, New York 10006. Bankers Trust
New York Corporation is an affiliate of BT Investment Partners, Inc.
Affiliates of Bankers Trust New York Corporation and BT Investment
Partners, Inc. are administrative agent, co-arranger and lenders under the
Old Credit Facility and will be administrative agent, co-arranger and
lenders under the New Credit Facility and have provided financial advisory,
investment banking or banking services to the Company and its affiliates
from time to time.

(15) Consists of shares of Class B Common Stock. The holder disclaims beneficial
ownership of shares of Common Stock issuable upon conversion of such Class
B Common Stock.

(16) The address of Chase Manhattan Investment Holdings, Inc. is One Chase
Manhattan Plaza, New York, New York 10006. Affiliates of Chase Manhattan
Investment Holdings, Inc. are co-arranger and lenders under the Old Credit
Facility and will be syndication agent, co-arranger and lenders under the
New Credit Facility and have provided financial advisory, investment
banking or banking services to the Company and its affiliates from time to
time.

(17) All shares held by the Other Selling Stockholders (other than Crescent
Shared Opportunity Fund and Crescent/Mach I Partners, L.P.) are Class B
Common Stock. All such shares being sold pursuant to this Offering will be
converted to Common Stock when sold.

(18) Such Selling Stockholder acted as a lender to the Company under the Senior
Subordinated Credit Facility entered in connection with the Acquisition.

43
<PAGE> 45

CERTAIN TRANSACTIONS

YUCAIPA CONSULTING AGREEMENT

On March 22, 1995, the Company and Dominick's entered into a five-year
consulting agreement (the "Consulting Agreement") with Yucaipa for certain
management and financial advisory services to be provided to the Company and its
subsidiaries. The services of Messrs. Burkle, Resnik and Graham and Ms. Figel,
acting in their capacities as directors and/or officers, and the services of
other Yucaipa personnel are provided to the Company, Dominick's and their
respective subsidiaries pursuant to the Consulting Agreement. See "Management."
Messrs. Burkle, Resnik and Graham and Ms. Figel, together with Mr. Karst, are
general partners of Yucaipa. The Consulting Agreement provided for the payment
to Yucaipa of annual management fees in an amount equal to two percent (2.0%) of
Dominick's EBITDA (defined in the Consulting Agreement as net income (or loss)
of Dominick's and its subsidiaries on a consolidated basis, determined in
accordance with generally accepted accounting principles, excluding (i) all net
extraordinary gains or losses, (ii) total interest expense of Dominick's and its
subsidiaries on a consolidated basis, (iii) provisions for taxes based on
income, (iv) total depreciation expense, (v) total amortization expense, (vi)
LIFO provision, and (vii) other non-cash items reducing net income and other
non-cash items increasing net income), plus reimbursement of out-of-pocket
expenses. In connection with the Offering the Company will pay $10.5 million to
Yucaipa to terminate its obligations under the Consulting Agreement. Pursuant to
the Consulting Agreement, Yucaipa received a fee of $14.0 million for consulting
and other services provided in connection with the Acquisition. Fees paid or
accrued under the Consulting Agreement in connection with management services
were approximately $1.5 million during the 32 weeks ended October 28, 1995 and
$2.0 million during the 40 weeks ended August 3, 1996.

MANAGEMENT AGREEMENT

In order to obtain future services from Yucaipa, the Company and Dominick's
will enter into a five-year management agreement (the "Management Agreement")
with Yucaipa upon the consummation of the Offering. In light of the reduced
levels of services anticipated following the consummation of the Offering, the
Management Agreement will provide for the payment of an annual fee to Yucaipa in
the amount of $1.0 million per year. In addition, the Company may retain Yucaipa
in an advisory capacity in connection with certain acquisition or sale
transactions, in which case the Company will pay Yucaipa an advisory fee equal
to one percent (1.0%) of the transaction value. The term of the agreement will
be automatically renewed on April 1 of each year for a five-year term unless 90
days' notice is given by either party. The Management Agreement may be
terminated at any time by the Company upon 90 days' written notice, provided
that Yucaipa will be entitled to full payment of the annual fee under the
agreement for the remaining term thereof, unless the Company terminates for
cause pursuant to the terms of the agreement. Yucaipa may terminate the
agreement if the Company fails to make a payment due thereunder, or upon a
Change of Control (as generally defined in the Management Agreement to include
certain mergers and asset sales, and acquisitions of beneficial ownership of
greater than 51% of the Company's outstanding voting securities by persons other
than Yucaipa). Upon any such termination, Yucaipa will be entitled to full
payment of the annual fee for the remaining term of the agreement.

ACQUISITION-RELATED TRANSACTIONS

For information concerning transactions between the Company and certain
affiliates in connection with the Acquisition, including the issuance of the
Yucaipa Warrant and certain payments to certain executive officers of
Dominick's, see "The Acquisition" and "Description of Capital Stock -- Yucaipa
Warrant."

44
<PAGE> 46

DESCRIPTION OF CAPITAL STOCK

GENERAL MATTERS

The total amount of authorized capital stock of the Company consists of 50
million shares of Common Stock, par value $0.01 per share, 10 million shares of
Class B Common Stock, par value $0.01 per share, and 200,000 shares of preferred
stock, par value $0.01 per share (the "Preferred Stock"). Upon completion of the
Offering and the application of the net proceeds therefrom, 13,404,009 shares of
Common Stock will be issued and outstanding, 7,955,026 shares of Class B Common
Stock will be issued and outstanding, and no shares of Preferred Stock will be
outstanding. The discussion herein describes the Company's capital stock, the
Amended and Restated Certificate of Incorporation and Bylaws which will be in
effect upon consummation of the Offering. The following summary of certain
provisions of the Company's capital stock describes all material provisions of,
but does not purport to be complete and is subject to, and qualified in its
entirety by, the Amended and Restated Certificate of Incorporation and the
Bylaws of the Company that are included as exhibits to the Registration
Statement of which this Prospectus forms a part and by the provisions of
applicable law.

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share of Common
Stock on all matters submitted to a vote of stockholders. There are no
cumulative voting rights. As of October 1, 1996, there were 7,024,654 shares of
Common Stock outstanding held by 43 holders of record. The issued and
outstanding shares of Common Stock are, and the shares of Common Stock being
offered will, upon payment therefor, be validly issued, fully paid and
nonassessable. Subject to the prior rights of the holders of any Preferred
Stock, the holders of outstanding shares of Common Stock are entitled to receive
dividends out of assets legally available therefor at such times and in such
amounts as the Board may from time to time determine. See "Dividend Policy."

The shares of Common Stock are not redeemable or convertible, and the
holders thereof have no preemptive or subscription rights to purchase any
securities of the Company. Upon liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to receive pro rata, along
with the holders of Class B Common Stock, the assets of the Company which are
legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of any holders of Preferred Stock
then outstanding.

The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "DFF," subject to official notice of issuance.

The transfer agent and registrar for the Common Stock will be First Chicago
Trust Company of New York.

CLASS B COMMON STOCK

Unless otherwise required by law, holders of the Class B Common Stock are
not entitled to vote on matters submitted to a vote of stockholders of the
Company, including the election of directors. Upon the consummation of the
Offering, holders of Class B Common Stock may elect at any time to convert any
or all of such shares into Common Stock, on a share-for-share basis, provided
that, subject to certain exceptions, shares of Class B Common Stock beneficially
owned by a bank holding company or an affiliate of a bank holding company may
not be converted into shares of Common Stock if immediately after such
conversion such holder and its affiliates would own more than 4.9% of any class
of voting securities of the Company.

As of October 1, 1996, there were 8,434,381 shares of Class B Common Stock
outstanding held by 14 holders of record. The issued and outstanding shares of
Class B Common Stock are validly issued, fully paid and nonassessable. Subject
to the prior rights of the holders of any Preferred Stock, the holders of
outstanding shares of Class B Common Stock are entitled to receive dividends out
of assets legally available therefor at such times and in such amounts as the
Board may from time to time determine. See "Dividend Policy."

45
<PAGE> 47

The shares of Class B Common Stock are not redeemable or convertible other
than into shares of Common Stock, and the holders thereof have no preemptive or
subscription rights to purchase any securities of the Company. Upon liquidation,
dissolution or winding up of the Company, the holders of Class B Common Stock
are entitled to receive pro rata, along with the holders of Common Stock, the
assets of the Company which are legally available for distribution, after
payment of all debts and other liabilities and subject to the prior rights of
any holders of Preferred Stock then outstanding.

PREFERRED STOCK

The Board may, without further action by the Company's stockholders, from
time to time, direct the issuance of additional shares of Preferred Stock in
series and may, at the time of issuance, determine the rights, preferences and
limitations of each series. Satisfaction of any dividend preferences of
outstanding shares of Preferred Stock would reduce the amount of funds available
for the payment of dividends on shares of Common Stock. Holders of shares of
Preferred Stock may be entitled to receive a preference payment in the event of
any liquidation, dissolution or winding-up of the Company before any payment is
made to the holders of shares of Common Stock. Under certain circumstances, the
issuance of shares of Preferred Stock may render more difficult or tend to
discourage a merger, tender offer or proxy contest, the assumption of control by
a holder of a large block of the Company's securities or the removal of
incumbent management. The Board, without stockholder approval, may issue shares
of Preferred Stock with voting and conversion rights which could adversely
affect the holders of shares of Common Stock. Upon consummation of the Offering
and the application of the net proceeds therefrom, there will be no shares of
Preferred Stock outstanding, and the Company currently has no present intention
to issue any shares of Preferred Stock.

CERTAIN PROVISIONS OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND
BYLAWS

The Amended and Restated Certificate of Incorporation provides that
stockholder action can be taken only at an annual or special meeting of
stockholders and cannot be taken by written consent in lieu of a meeting. The
Amended and Restated Certificate of Incorporation and the Bylaws provide that,
except as otherwise required by law, special meetings of the stockholders can
only be called pursuant to a resolution adopted by a majority of the Board of
Directors or by the Chief Executive Officer of the Company or by the holders of
a majority of the outstanding Common Stock.

The Bylaws establish an advance notice procedure for stockholder proposals
to be brought before an annual meeting of stockholders of the Company, including
proposed nominations of persons for election to the Board. Stockholders at an
annual meeting may only consider proposals or nominations specified in the
notice of meeting or brought before the meeting by or at the direction of the
Board or by a stockholder who was a stockholder of record on the record date for
the meeting, who is entitled to vote at the meeting and who has given to the
Company's Secretary timely written notice, in proper form, of the stockholder's
intention to bring that business before the meeting. Although the Bylaws do not
give the Board the power to approve or disapprove stockholder nominations of
candidates or proposals regarding other business to be conducted at a special or
annual meeting, the Bylaws may have the effect of precluding the conduct of
certain business at a meeting if the proper procedures are not followed or may
discourage or defer a potential acquiror from conducting a solicitation of
proxies to elect its own slate of directors or otherwise attempting to obtain
control of the Company.

SECTION 203 OF DELAWARE LAW

Following the consummation of the Offering, the Company will be subject to
the "business combination" provisions of the Delaware General Corporation Law.
In general, such provisions prohibit a publicly-held Delaware corporation from
engaging in various "business combination" transactions with any "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an "interested stockholder," unless (i) the transaction
in which the person became an "interested stockholder" or the business
combination is approved by the Board of Directors prior to the date the
interested stockholder obtained such status, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an "interested
stockholder," the "interested stockholder" owned at least 85% of the voting
stock of the

46
<PAGE> 48

corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned by
(a) persons who are directors and also officers and (b) employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer or (iii) on or subsequent to such date the "business combination" is
approved by the Board of Directors and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the "interested stockholder." A
"business combination" is defined to include mergers, asset sales and other
transactions resulting in financial benefit to a stockholder. In general, an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of a corporation's
voting stock. The statute could prohibit or delay mergers or other takeover or
change in control attempts with respect to the Company and, accordingly, may
discourage attempts to acquire the Company.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Amended and Restated Certificate of Incorporation limits the liability
of directors to the fullest extent permitted by the Delaware General Corporation
Law. In addition, the Amended and Restated Certificate of Incorporation provides
that the Company shall indemnify directors and officers of the Company to the
fullest extent permitted by such law.

STOCKHOLDERS AGREEMENTS

Under the terms of the Stockholders Agreement entered into by the Company,
certain affiliates of Yucaipa and Apollo and certain other stockholders of the
Company, Yucaipa is entitled to nominate six directors to the Board of Directors
and the board of directors of Dominick's. Yucaipa's right to nominate members to
such boards of directors will be reduced by three if Mr. Burkle ceases for any
reason to beneficially own at least 33 1/3% of the shares beneficially owned by
Yucaipa on the date of the Acquisition and shall terminate if Mr. Burkle ceases
for any reason (including death) to beneficially own at least 25% of the shares
beneficially owned by Yucaipa on such date. The Stockholders Agreement entitles
Apollo to nominate three directors to the Board of Directors and the board of
directors of Dominick's. Apollo's right to nominate members to such boards of
directors will be reduced by one if Apollo ceases to beneficially own at least
33 1/3% of the shares beneficially owned by Apollo on the date of the
Acquisition and shall terminate if Apollo ceases to beneficially own at least
25% of the shares beneficially owned by Apollo on such date. If Apollo ceases to
own at least 25% of the shares beneficially owned by Apollo on the date of the
Acquisition and the parties to the Stockholders Agreement other than Apollo
beneficially own at least 33 1/3% of the shares of Common Stock beneficially
owned by such stockholders on the date of the Acquisition, Yucaipa will be
entitled to nominate an additional member to the Board of Directors and the
board of directors of Dominick's. The Stockholders Agreement provides that the
parties thereto shall vote their shares and take all actions otherwise necessary
to ensure the election to such boards of the Yucaipa nominees and the Apollo
nominees. The Yucaipa nominees to such boards are Messrs. Burkle, Resnik, Karst,
Graham and Mariano and Ms. Figel. The Apollo nominees are Messrs. Copses, Kaplan
and Ressler. In addition, Apollo and certain other stockholders will have the
right to participate in any bona fide transfer of the pecuniary interests in
Common Stock beneficially owned by Yucaipa and its affiliates. In certain
circumstances, Yucaipa will have the right to compel the participation of Apollo
and other stockholders in sales of all the outstanding shares of Company stock.
As of the date of the Acquisition, Yucaipa and its affiliates beneficially owned
an aggregate of 2,934,909 shares of Company capital stock and Apollo and its
affiliates owned an aggregate of 5,855,181 shares of Company capital stock.
Following the consummation of the Offering, affiliates of Yucaipa and Apollo
will beneficially own approximately 13.8% and 27.4%, respectively, of the
outstanding Common Stock, representing an equivalent percentage of the total
voting power of the Company (assuming conversion by Apollo of 2,455,224 shares
of Class B Common Stock into Common Stock).

Each member of management of the Company holding shares of Common Stock,
Reinvestment Options or other Company stock options (collectively, the
"Management Stockholders") executed a management stockholders agreement with the
Company (collectively, the "Management Stockholders Agreements"). The

47
<PAGE> 49

Management Stockholders Agreements generally provide the Company with a right of
first refusal in the event of proposed sales of Common Stock acquired by the
Management Stockholders upon the exercise of stock options and an option,
exercisable following any termination for cause of a Management Stockholder's
employment or if the Management Stockholder commences employment with a
competitor, to repurchase at Fair Market Value (as defined in the Management
Stockholders Agreements) any Common Stock acquired by such Management
Stockholder upon the exercise of Company stock options. Each Management
Stockholders Agreement contains certain rights of the Management Stockholders to
participate in sales by Yucaipa of Common Stock and certain obligations of the
Management Stockholders to sell their Common Stock in the case of a sale for
cash of all outstanding Common Stock. Finally, the Management Stockholders are
required to vote their Common Stock to elect to the Board of Directors the
directors nominated by Yucaipa and Apollo. The Management Stockholders
Agreements, and all rights and obligations of the Management Stockholders
thereunder described above, will terminate following the Offering.

YUCAIPA WARRANT

Upon the closing of the Acquisition, the Company issued to Yucaipa a
warrant to purchase shares of Common Stock (the "Yucaipa Warrant"). The Yucaipa
Warrant will become exercisable at the election of Yucaipa upon the consummation
of the Offering at an exercise price of $20.73 per share. If not exercised, the
Yucaipa Warrant will expire on March 22, 2000; provided, however, that if on
such date certain financial performance requirements are satisfied, the
expiration date will be extended to March 22, 2002 and, in such case, the
exercise price is increased daily at a rate of 25% per annum. The Yucaipa
Warrant may be exercised for cash or on a cashless basis. Pursuant to the
cashless exercise provisions of the Yucaipa Warrant, upon exercise in full
Yucaipa would be entitled to receive a number of shares equal to the difference
between 3,874,492 shares and that number of shares having a market value as of
the exercise date equal to $80.3 million (i.e., the aggregate exercise price).

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have outstanding
21,359,035 shares of Common Stock and Class B Common Stock. All of the shares
sold in this Offering will be freely tradeable by persons other than affiliates
of the Company.

RULE 144

In general, Rule 144, as currently in effect, provides that a person (or
persons whose sales are aggregated) who is an affiliate of the Company or who
has beneficially owned shares which are issued and sold in reliance upon certain
exemptions from registration under the Securities Act ("Restricted Shares") for
at least two years is entitled to sell within any three-month period a number of
shares that does not exceed the greater of one percent (1%) of the then
outstanding shares of Common Stock (beginning on the 91st day immediately after
this Offering) or the average weekly trading volume in the Common Stock during
the four calendar weeks preceding the filing of a notice of intent to sell.
Sales under Rule 144 are also subject to certain manner-of-sale provisions,
notice requirements and the availability of current public information about the
Company. However, a person who is not deemed to have been an "affiliate" of the
Company at any time during the three months preceding a sale, and who has
beneficially owned Restricted Shares for at least three years, would be entitled
to sell such shares under Rule 144 without regard to volume limitations,
manner-of-sale provisions, notice requirements or the availability of current
public information about the Company. If a proposed amendment to Rule 144 is
adopted, the two- and three-year holding period requirements described above
would be reduced to one and two years, respectively. The Company, each of the
Company's executive officers and directors and certain stockholders have agreed,
subject to certain exceptions relating to the Company, that they will not,
directly or indirectly, offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of any shares of Common Stock, Class B Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, or in any other manner transfer all or a portion of the economic
consequences associated with the ownership of such Common Stock or Class B
Common Stock, or to cause a registration statement covering any shares of Common
Stock to be filed, for a period of 180 days

48
<PAGE> 50

after the date of this Prospectus, without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation. See "Underwriting."

After the expiration of the lock-up period, 14,525,411 shares of Common
Stock and Class B Common Stock (including Common Stock issuable upon conversion
of the Class B Common Stock, but excluding shares issuable upon exercise of the
Yucaipa Warrant or any employee stock options) will be eligible for sale
pursuant to Rule 144, subject to certain volume limitation and other
requirements.

Prior to the Offering, there has been no public market for the shares of
Common Stock or Class B Common Stock, and no predictions can be made as to the
effect that sales of Common Stock or Class B Common Stock under Rule 144,
pursuant to a registration statement or otherwise, or the availability of shares
of Common Stock or Class B Common Stock for sale, will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of
Common Stock in the public market, or the perception that such sales could
occur, could adversely affect prevailing market prices and could impair the
Company's future ability to raise capital through an offering of its equity
securities.

REGISTRATION RIGHTS

Pursuant to a Registration Rights Agreement entered into in connection with
the Acquisition (the "Registration Rights Agreement"), Apollo, and certain other
investors as a group, were each granted two demand and unlimited piggyback
registration rights with respect to Common Stock. The Company intends to enter
into a similar registration rights agreement with Yucaipa prior to the
consummation of the Offering. Upon the consummation of the Offering, there will
be 14,525,411 shares of Common Stock owned by such investors subject to the
Registration Rights Agreement. Registration rights can be exercised at any time
after the date of this Prospectus subject to the 180-day lock-up period
described under "Underwriting."

THE ACQUISITION

On March 22, 1995, the Company consummated the Acquisition for an aggregate
purchase price of approximately $692.9 million, including $124.5 million of
assumed indebtedness (but excluding the Company's fees and expenses of
approximately $41.2 million). The Company effected the Acquisition by acquiring
100% of the capital stock of Dominick's parent, formerly known as Dodi, Inc.
("Dodi"), for $346.6 million in cash and $40 million of the Company's Redeemable
Preferred Stock. In addition, the Company repaid $34.3 million of secured
promissory notes issued by Dominick's prior to the Acquisition to discharge all
obligations under its SARs plan and to repurchase shares of Dominick's
restricted stock held by certain management employees (the "Management Stock
Transactions"). In connection with the Acquisition, the Company refinanced
$135.7 million of Dominick's existing indebtedness (including premiums and
accrued interest), assumed $124.5 million of existing capital leases and other
indebtedness and paid $11.8 million of employment termination, seller advisory
and other seller fees and expenses.

The principal sources of cash to finance the Acquisition were (i) $330
million in term loans under the Old Credit Facility, consisting of the $140
million six-year amortizing Tranche A Loans, the $60 million seven-year
amortizing Tranche B Loans, the $65 million eight-year amortizing Tranche C
Loans and the $65 million eight and one-half year amortizing Tranche D Loans
(collectively, the "Term Loan Facilities"); (ii) the $150 million unsecured
Senior Subordinated Credit Facility; (iii) a $100 million cash investment in the
Company's common stock by certain affiliates of Yucaipa and certain other
institutional investors, including affiliates of Apollo and affiliates of BT
Securities Corporation and Chase Securities, Inc. In addition, certain members
of the Company's management made a $5 million equity investment in the Company
by cancelling SARs or exchanging restricted stock of Dominick's for Common Stock
or Company stock options.

Prior to the Acquisition, Dominick's distributed two parcels of owned real
estate with a net book value of $3.2 million to its parent, Dodi, which, in
turn, distributed these parcels, together with several parcels of real estate
owned by two other subsidiaries of Dodi, to one of its shareholders (the
"Excluded Properties Transactions"). Dominick's entered into new leases for the
stores located on the two Dominick's owned parcels which were distributed.
Pursuant to the terms of a tax matters agreement dated as of March 22, 1995

49
<PAGE> 51

the sellers agreed, subject to certain conditions and limitations, to indemnify
the Company for any taxable gains resulting from the Excluded Properties
Transactions, to the extent such gains are not offset by certain specified
deductions related to the Management Stock Transactions.

In connection with the Acquisition, the Company and Yucaipa entered into
the Consulting Agreement pursuant to which Yucaipa received a $14 million
consulting fee. In addition, Yucaipa received the Yucaipa Warrant. See "Certain
Transactions" and "Description of Capital Stock -- Yucaipa Warrant."

The following table illustrates the sources and uses of funds to consummate
the Acquisition:

SOURCES AND USES

(dollars in millions)

<TABLE>
<CAPTION>
CASH SOURCES
- -------------------------------------------------
<S> <C>
Term Loan Facilities.................... $330.0
Senior Subordinated Credit Facility..... 150.0
Equity Investment (Common Stock)(a)..... 100.0
------
Total Cash Sources.................... $580.0
------

<CAPTION>
NON-CASH SOURCES
<S> <C>
Redeemable Preferred Stock.............. $40.0
Assumed capital leases.................. 111.9
Assumed mortgages and other............. 12.6
------
Total Non-Cash Sources.................. $164.5
------
Total Sources........................... $744.5
======
<CAPTION>
CASH USES
<S> <C>
Purchase Dodi capital stock............. $346.6
Repay existing bank debt................ 24.2
Repay 11.78% Senior Notes(b)............ 111.5
Payment for management stock and SARs... 34.3
Working capital......................... 10.4
Fees and expenses(c).................... 41.2
Employment termination, seller advisory
and other fees(d)....................... 11.8
------
Total Cash Uses......................... $580.0
------
<CAPTION>
NON-CASH USES
<S> <C>
Purchase Dodi capital stock............. $40.0
Assumed capital leases.................. 111.9
Assumed mortgages and other............. 12.6
------
Total Non-Cash Uses..................... $164.5
------
Total Uses.............................. $744.5
======
</TABLE>

- ------------------------------

(a) Does not include the $5 million equity investment by certain members of the
Company's management.

(b) Amount represents the $90 million principal amount of the Company's 11.78%
Senior Notes, plus a prepayment premium and accrued interest.

(c) Amount includes a $14.0 million payment to Yucaipa for advisory and other
services provided in connection with the Acquisition.

(d) Represents amount payable to three departing senior officers and one
continuing senior officer under employment contracts, a fee payable to the
sellers' financial advisor and certain other payments to the sellers.

DESCRIPTION OF CERTAIN INDEBTEDNESS

NEW CREDIT FACILITY

In connection with the Offering, the Company intends to enter into the New
Credit Facility with a syndicate of financial institutions. The following is a
summary of the material terms and conditions presently anticipated with respect
to the New Credit Facility. This summary does not purport to be a complete
description of the New Credit Facility, however, and is subject to the detailed
provisions of the loan agreement (the "Loan Agreement") and various related
documents to be entered into in connection with the New Credit Facility, copies
of which will be filed as exhibits to the Registration Statement.

General

The New Credit Facility will provide for a $100 million amortizing New Term
Loan, a $105 million New Revolving Term Facility and a $120 million New
Revolving Facility, each of which has a six and one-half year term. The New
Revolving Term Facility and the New Revolving Facility will be available for
working capital and general corporate purposes, and up to $50 million of the New
Revolving Facility may be used to support letters of credit. The Company
utilizes letters of credit to cover workers' compensation, self-insurance
liabilities and for other general purposes.

50
<PAGE> 52

Interest Rate; Fees

Borrowings under (i) the New Revolving Facilities and the New Term Loan
will bear interest at a rate equal to, at the option of the Company, the Base
Rate (defined in the Loan Agreement generally to mean the higher of (i) Bankers
Trust Company's prime rate or (ii) the federal funds rate plus 0.5%) plus 0.50%
per annum or the reserve adjusted Euro-Dollar Rate (as defined in the Loan
Agreement) plus a maximum 1.50% per annum (subject to reduction as certain
financial tests are satisfied). Up to $20 million of the New Revolving Facility
will be available as a swingline facility and loans outstanding under the
swingline facility shall bear interest at the Base Rate plus 0.125% per annum
(subject to reduction as certain financial tests are satisfied). Applicable
interest rates on the New Term Loan, the New Revolving Term Facility, the
swingline loans and the New Revolving Facility and the fees payable under the
New Revolving Facility on letters of credit, will be reduced by up to 0.75% per
annum (or up to 0.50% per annum in the case of Base Rate loans) if the Company
meets certain financial tests. The Company will pay the issuing bank a fee of
0.25% per annum on each standby letter of credit and a fee to be negotiated with
the issuing bank on each commercial letter of credit and will pay the lenders
under the New Revolving Facility a letter of credit fee for standby letters of
credit and commercial letters of credit equal to the applicable margin for
Euro-dollar loans under the New Revolving Facility. Each of these fees will be
calculated based on the amount available to be drawn under a letter of credit.
In addition, the Company will pay a commitment fee on the unused portions of the
New Revolving Facilities and for purposes of calculating this fee, the swingline
facility shall not be deemed to be outstanding. The New Credit Facility may be
prepaid in whole or in part without premium or penalty.

Amortization Prepayments

The New Term Loan matures in six and one-half years and is subject to
amortization on a quarterly basis, commencing in the second year of the
facility, in aggregate annual amounts of $10 million in the second year of the
facility; $10 million in the third year; $15 million in the fourth year; $20
million in the fifth year; $30 million in the sixth year and $15 million in the
final six months. The New Revolving Term Facility and the New Revolving Facility
will also mature in six and one-half years. There will not be any annual
cleandown provisions in the New Revolving Term Facility or the New Revolving
Facility. The Company will be required to make certain prepayments, subject to
certain exceptions, on the New Credit Facility with a specified percentage
(which may be reduced to zero if certain financial tests are satisfied) of its
Consolidated Excess Cash Flow (as defined in the Loan Agreement) and with the
proceeds from certain asset sales, issuances of debt securities and any pension
plan reversions.

Guarantees and Collateral

The Company and all subsidiaries of the Company (other than Dominick's)
will guarantee Dominick's obligations under the New Credit Facility. Dominick's
obligations and the guarantees of the Company and its subsidiaries will be
secured by substantially all personal property of the Company and its
subsidiaries, including a pledge of the stock of all subsidiaries of the
Company. The Company's guarantee will be secured by a pledge of the stock of all
of the Company's subsidiaries (including the stock of Dominick's). Dominick's
obligations and the guarantees of the Company and its subsidiaries will also be
secured by first priority liens on certain real property fee interests of the
Company and its subsidiaries. The Company and its subsidiaries will use their
reasonable economic efforts to provide the lenders with a first priority lien on
certain leasehold interests of the Company and its subsidiaries.

Covenants

It is anticipated that the obligation of the lenders under the New Credit
Facility to advance funds will be subject to the satisfaction of certain
conditions customary in agreements of this type. In addition, the Company will
be subject to certain customary affirmative and negative covenants contained in
the New Credit Facility, including, without limitation, covenants that restrict,
subject to specified exceptions, (i) the incurrence of additional indebtedness
and other obligations, (ii) the granting of liens, (iii) the making of certain
investments and joint ventures, (iv) the incurrence of certain contingent
obligations, (v) the payment of certain dividends and restricted payments, (vi)
mergers and acquisitions and other fundamental corporate

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<PAGE> 53

changes, (vii) cash capital expenditures, (viii) the incurrence of lease
obligations and (ix) engaging in transactions with affiliates.

It is anticipated that the New Credit Facility will also impose on the
Company and its subsidiaries certain financial tests and minimum ratios which,
among other things, require that the Company (a) maintain a minimum fixed charge
coverage ratio; (b) maintain, during each fiscal quarter, a ratio of
Consolidated Total Debt (as defined in the Loan Agreement) to Consolidated
Adjusted EBITDA (as defined in the Loan Agreement); and (c) maintain at all
times a minimum Consolidated Net Worth (as defined in the Loan Agreement).

Events of Default

The New Credit Facility will also provide for customary events of default.
The occurrence of any of such events of default could result in acceleration of
the Company's obligations under the New Credit Facility and foreclosure on the
collateral securing such obligations, which could have material adverse results
to holders of the Common Stock.

SENIOR SUBORDINATED NOTES DUE 2005

Dominick's 10 7/8% Senior Subordinated Notes (the "Senior Subordinated
Notes") were issued on May 4, 1995 in an aggregate principal amount of $200.0
million. The Senior Subordinated Notes are subordinated to the prior payment
when due of all Senior Indebtedness (as defined in the Note Indenture) and are
guaranteed on a senior subordinated basis by Dominick's wholly-owned
subsidiaries. The Senior Subordinated Notes bear interest at a rate of 10 7/8%
per annum, payable on May 1 and November 1 of each year. The Senior Subordinated
Notes mature on May 1, 2005. On or after May 1, 2000, the Senior Subordinated
Notes may be redeemed in whole or in part, at any time, or in part from time to
time, at the option of Dominick's, at a redemption price equal to the applicable
percentage of the principal amount thereof set forth below, plus accrued and
unpaid interest to the redemption date, if redeemed during the 12 months
commencing on May 1, of the years set forth below:

<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---------------------------------------------------------- ----------
<S> <C>
2000...................................................... 104.833%
2001...................................................... 103.765%
2002...................................................... 102.417%
2003...................................................... 101.208%
2004 and thereafter....................................... 100.000%
</TABLE>

In addition, on or prior to May 1, 1998 Dominick's may, at its option, use
the net cash proceeds from one or more Public Equity Offerings (as defined in
the Note Indenture) to redeem up to an aggregate of 33 1/3% of the principal
amount of the Senior Subordinated Notes originally issued, at a redemption price
equal to 109.667% of the principal amount thereof if redeemed during the 12
months commencing on May 1, 1996, and 108.458% of the principal amount thereof
if redeemed during the 12 months commencing on May 1, 1997, in each case plus
accrued and unpaid interest, if any, to the redemption date.

The Note Indenture provides that if a Change of Control (as defined
therein) occurs, each holder will have the right to require Dominick's to
repurchase such holder's Senior Subordinated Notes pursuant to a Change of
Control Offer (as defined therein) at 101% of the principal amount thereof plus
accrued interest, if any, to the date of repurchase.

The Note Indenture contains certain covenants, including, but not limited
to, covenants with respect to the following matters: (i) limitations on
dividends and other restricted payments; (ii) limitations on incurrences of
additional indebtedness; (iii) limitations on liens; (iv) limitations on asset
sales; (v) limitations on dividend and other payment restrictions affecting
subsidiaries; (vi) limitations on transactions with affiliates; (vii)
limitations on preferred stock of subsidiaries; (viii) limitations on mergers
and certain other transactions; (ix) limitations on other senior subordinated
indebtedness; and (x) limitations on guarantees of certain indebtedness.

52
<PAGE> 54

The covenant in the Note Indenture which places limitations on Dominick's
ability to pay dividends and make other restricted payments to the Company
generally provides that Dominick's may pay such dividends or make such payments
if (i) no default or event of default shall have occurred under the Note
Indenture; (ii) Dominick's would be able to borrow at least $1.00 of additional
indebtedness under the provision of the Note Indenture which permits debt to be
incurred if Dominick's pro forma fixed charge coverage ratio is greater than 2.0
to 1.0; and (iii) the aggregate amount spent for all such restricted payments
does not exceed the sum of (a) 50% of Dominick's consolidated net income (plus
100% of any consolidated net loss) from May 4, 1995 to the date of the payment,
plus (b) 100% of the net proceeds received from the issuance of qualified
capital stock, or from any capital contributions to Dominick's, after May 4,
1995; plus (c) $10 million. Notwithstanding the foregoing limitations,
Dominick's is generally permitted to make certain permitted payments to the
Company, including payments for taxes pursuant to the terms of a tax sharing
agreement, to permit the repurchase of certain employee stock, and to permit the
Company to perform legal, accounting, corporate reporting and administrative
functions in the ordinary course of business.

UNDERWRITING

Subject to the terms and conditions contained in the Underwriting Agreement
(the "Underwriting Agreement"), the underwriters named below (the
"Underwriters"), for whom Donaldson, Lufkin & Jenrette Securities Corporation,
Morgan Stanley & Co. Incorporated, BT Securities Corporation and Chase
Securities, Inc. are acting as representatives (the "Representatives") have
severally agreed to purchase from the Company and the Selling Stockholders an
aggregate of 6,400,000 shares of Common Stock. The number of shares of Common
Stock that each Underwriter has agreed to purchase is set forth opposite its
name below:

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
---------------------------------------------------------------- ----------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.............
Morgan Stanley & Co. Incorporated...............................
BT Securities Corporation.......................................
Chase Securities, Inc. .........................................
---------
Total................................................. 6,400,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by counsel and
to certain other conditions. If any shares of Common Stock are purchased by the
Underwriters pursuant to the Underwriting Agreement, all such shares (other than
shares covered by the over-allotment option described below) must be purchased.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.

The Underwriters have advised the Company that they propose to offer the
shares of Common Stock to the public initially at a price to the public set
forth on the cover page of this Prospectus and to certain dealers (who may
include the Underwriters) at such price less a concession not to exceed $ per
share. The Underwriters may allow, and such dealers may re-allow, discounts not
in excess of $ per share to any other Underwriter and certain other dealers.

The Selling Stockholders have granted to the Underwriters an option to
purchase up to an aggregate of 960,000 additional shares of Common Stock, at the
initial public offering price net of underwriting discounts and commissions,
solely to cover over-allotments. Such option may be exercised at any time within
30 days after the date of this Prospectus. To the extent that the Underwriters
exercise such option, each of the Underwriters will be committed, subject to
certain conditions, to purchase a number of option shares proportionate to such
Underwriter's initial commitment as indicated in the preceding table.

Subject to certain exceptions, the Company, the Selling Stockholders and
certain other stockholders who are parties to the Stockholders Agreement have
agreed not to directly or indirectly, offer, sell, contract to sell,

53
<PAGE> 55

grant any option to purchase or otherwise dispose of any Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock, or
in any other manner transfer all or a portion of the economic consequences
associated with the ownership of such Common Stock, or to cause a registration
statement covering any shares of Common Stock to be filed, for a period of 180
days from the date of this Prospectus, without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation.

Because an affiliate of Chase Securities, Inc. beneficially owns in excess
of 10% of the common equity of the Company, the underwriting arrangements for
the Offering must be made in compliance with certain requirements of Rule 2720
(the "Rule") of the Conduct Rules of the National Association of Securities
Dealers, Inc. (the "NASD"). In this regard, Donaldson, Lufkin & Jenrette
Securities Corporation will act as "qualified independent underwriter" within
the meaning of the Rule and is assuming the responsibilities of acting as a
qualified independent underwriter in pricing the Offering and conducting due
diligence. As compensation for the services of Donaldson, Lufkin & Jenrette
Securities Corporation as a qualified independent underwriter, the Company has
agreed to pay the amount of $5,000. Certain employees of Donaldson, Lufkin &
Jenrette Securities Corporation are limited partners in Yucaipa Chicago
Partners, L.P., which beneficially owns 253,470 shares of Common Stock. In the
aggregate, the proportionate ownership of such employees represents less than 1%
of the outstanding Common Stock.

Affiliates of BT Securities Corporation and Chase Securities, Inc. are
co-arrangers and lenders under the Old Credit Facility and will be co-arrangers
and lenders under the New Credit Facility for which they have received and will
receive customary fees. A portion of the proceeds of the Offering is being used
to repay amounts outstanding under the Old Credit Facility. From time to time
the Representatives and their affiliates have provided, and may in the future
provide, financial advisory, investment banking or banking services to the
Company and its affiliates.

Pursuant to the requirements of the Rule, the Underwriters will not confirm
sales of Common Stock to any accounts over which they exercise discretionary
authority without the prior specific written approval of the transaction by the
customer.

Prior to the Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price will be determined by
negotiations between the Company and the Underwriters. Among the factors to be
considered in determining the initial public offering price will be the history
of, and prospects for, the Company and the supermarket industry generally, an
assessment of the Company's management, its past and present operations and
financial performance, the prospects for future earnings of the Company, the
general condition of the securities markets at the time of the Offering, and the
market prices of and demand for publicly traded common stock of comparable
companies in recent periods.

No action has been taken in any jurisdiction by the Company or the
Underwriters that would permit a public offering of Common Stock offered
pursuant to the Offering in any jurisdiction where action for that purpose is
required, other than the United States. The distribution of this Prospectus and
the offering or sale of Common Stock offered hereby may not be offered or sold,
directly or indirectly, and neither this Prospectus nor any other offering
material or advertisements in connection with the Common Stock may be
distributed or published, in or from any jurisdiction, except under
circumstances that will result in compliance with applicable rules and
regulations of any such jurisdiction. Such restrictions may be set out in
applicable Prospectus supplements. Persons into whose possession this Prospectus
comes are required by the Company and the Underwriters to inform themselves
about and to observe any applicable restrictions. This Prospectus does not
constitute an offer of, or an invitation to subscribe for purchase, any shares
of Common Stock and may not be used for the purpose of an offer to, or
solicitation by, anyone in any jurisdiction or in any circumstances in which
such offer or solicitation is not authorized or is unlawful.

No underwriter may offer or sell and, prior to the date six months after
the latest closing date, offer or sell any Common Stock in the United Kingdom by
means of any document other than to persons whose ordinary activity is to buy
and sell securities or debentures, whether as principal or agent, or in
circumstances that do not constitute an offer to the public within the meaning
of the public offers of Securities Regulations 1996. Each underwriter will (i)
comply with all applicable provisions of The Financial Services Act 1986 with
respect to anything done by it in relation to the Common Stock in, from or
otherwise involving the United

54
<PAGE> 56

Kingdom and (ii) only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the common stock to any person of
a kind described in article II(3) of The Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996, or to any person to whom the document
may otherwise lawfully be issued or passed on.

The Common Stock has been approved for listing on the New York Exchange,
subject to official notice of issuance. In order to meet the requirements for
listing on the New York Stock Exchange, the Underwriters have undertaken to sell
lots of 100 or more shares of Common Stock to a minimum of 2,000 beneficial
holders.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Latham & Watkins, Los Angeles, California. Certain legal matters in
connection with the Offering will be passed upon for the Underwriters by Cahill
Gordon & Reindel (a partnership including a professional corporation), New York,
New York.

EXPERTS

The consolidated financial statements of Dominick's Supermarkets, Inc. as
of October 28, 1995 and October 29, 1994 (Predecessor Company) and for the
period October 30, 1994 through March 21, 1995 (Predecessor Company), the period
March 22, 1995 through October 28, 1995, and for the two years in the period
ended October 29, 1994 (Predecessor Company) appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Commission in Washington, D.C. a
Registration Statement on Form S-1 under the Securities Act, with respect to the
Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Common Stock, reference
is hereby made to the Registration Statement and the exhibits and schedules
thereto. The Registration Statement may be inspected, without charge, and copied
at the public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
also maintains a World Wide Web site that contains registration statements,
reports, proxy and information statements and other materials that are filed
through the Commission's Electronic Data Gathering, Analysis and Retrieval
system. This World Wide Web site can be accessed at http://www.sec.gov.

55
<PAGE> 57

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Auditors........................................................ F-2
Consolidated Balance Sheets as of October 29, 1994 (Predecessor Company), October 28,
1995 and August 3, 1996 (unaudited)................................................. F-3
Consolidated Statements of Operations for the 52 weeks ended October 30, 1993, the 52
weeks ended October 29, 1994, the 20 weeks ended March 21, 1995 (Predecessor
Company), the 32 weeks ended October 28, 1995, the 20 weeks ended August 5, 1995
(unaudited) and the 40 weeks ended August 3, 1996 (unaudited)....................... F-4
Consolidated Statements of Stockholders' Equity for the 52 weeks ended October 30,
1993, the 52 weeks ended October 29, 1994, the 20 weeks ended March 21, 1995
(Predecessor Company), the 32 weeks ended October 28, 1995 and the 40 weeks ended
August 3, 1996 (unaudited).......................................................... F-5
Consolidated Statements of Cash Flows for the 52 weeks ended October 30, 1993, the 52
weeks ended October 29, 1994, the 20 weeks ended March 21, 1995 (Predecessor
Company), the 32 weeks ended October 28, 1995, the 20 weeks ended August 5, 1995
(unaudited) and the 40 weeks ended August 3, 1996 (unaudited)....................... F-6
Notes to Consolidated Financial Statements............................................ F-7
Unaudited Pro Forma Financial Statements.............................................. P-1
</TABLE>

F-1
<PAGE> 58

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Dominick's Supermarkets, Inc.

We have audited the accompanying consolidated balance sheets of Dominick's
Supermarkets, Inc. as of October 28, 1995 and October 29, 1994 (Predecessor
Company), and the related consolidated statements of operations, stockholders'
equity, and cash flows for the period October 30, 1994 through March 21, 1995
(Predecessor Company), the period March 22, 1995 through October 28, 1995, and
for the two years in the period ended October 29, 1994 (Predecessor Company).
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Dominick's
Supermarkets, Inc. at October 28, 1995 and October 29, 1994 (Predecessor
Company), and the results of its operations and its cash flows for the period
October 30, 1994 through March 21, 1995 (Predecessor Company), the period March
22, 1995 through October 28, 1995, and for the two years in the period ended
October 29, 1994 (Predecessor Company), in conformity with generally accepted
accounting principles.

As discussed in Note 1 to the consolidated financial statements, in 1994,
the Predecessor Company changed its method of accounting for income taxes.

Chicago, Illinois
January 5, 1996
except for Note 12, as to which
the date is , 1996

- --------------------------------------------------------------------------------

The foregoing is in the form that will be signed when the stock split
becomes effective prior to the effective date of the Registration Statement as
described in Note 12 to the financial statements.

/s/ ERNST & YOUNG LLP

August 30, 1996

F-2
<PAGE> 59

DOMINICK'S SUPERMARKETS, INC.

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
----------- -----------------------------
OCTOBER 29, OCTOBER 28,
1994 1995 AUGUST 3,
----------- ----------- 1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 18,094 $ 55,551 $ 66,827
Receivables, net................................ 24,051 25,314 11,787
Inventories..................................... 168,241 182,880 179,962
Prepaid expenses & other........................ 17,622 10,573 14,166
-------- ---------- ----------
Total current assets.................... 228,008 274,318 272,742
Property and equipment, net..................... 429,699 353,015 350,789
Other assets:
Deferred financing costs, net................... 942 22,567 20,667
Goodwill, net................................... -- 419,298 422,707
Other, net...................................... 10,316 31,011 28,031
-------- ---------- ----------
Total other assets...................... 11,258 472,876 471,405
-------- ---------- ----------
Total assets...................................... $ 668,965 $ 1,100,209 $ 1,094,936
======== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................ $ 147,588 $ 171,209 $ 141,062
Accrued payroll and related liabilities......... 37,431 31,579 29,668
Taxes payable................................... 25,623 7,958 23,150
Other accrued liabilities....................... 34,404 83,422 75,048
Current portion of long-term debt............... 862 9,771 2,108
Current portion of capital lease obligations.... 4,381 4,565 7,738
-------- ---------- ----------
Total current liabilities............... 250,289 308,504 278,774
Long-term debt:
Term loans...................................... 141,977 281,109 273,789
Senior Subordinated Notes....................... -- 200,000 200,000
Capital lease obligations......................... 108,486 103,921 121,075
Deferred income taxes and other liabilities....... 51,540 66,730 78,291
Redeemable Exchangeable Cumulative Preferred Stock
Series A preferred stock, $.01 par value, 40,000
shares authorized, 40,000 issued and
outstanding, liquidation and redemption at
$1,000 per share plus accumulated and unpaid
dividends....................................... -- 43,722 48,951
Stockholders' equity:
Common Stock - $.10 par value, 300,000 shares
authorized, 263,600 shares issued and
outstanding at October 29, 1994.............. 26 -- --
Common Stock - $.01 par value 36,594,895 shares
authorized, 6,996,505 shares issued and
outstanding at October 28, 1995, 7,012,607
shares issued and outstanding at August 3,
1996......................................... -- 70 70
Class B Common Stock - $.01 par value,
36,594,895 shares authorized, 8,434,392
shares issued and outstanding at October 28,
1995, 8,434,392 shares issued and outstanding
at August 3, 1996............................ -- 84 84
Additional paid-in capital...................... 334 107,739 107,688
Retained earnings (deficit)..................... 116,313 (11,670) (13,786)
-------- ---------- ----------
Total stockholders' equity.............. 116,673 96,223 94,056
-------- ---------- ----------
Total liabilities and stockholders' equity........ $ 668,965 $ 1,100,209 $ 1,094,936
======== ========== ==========
</TABLE>

See accompanying notes.

F-3
<PAGE> 60

DOMINICK'S SUPERMARKETS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------------------
COMPANY
52 WEEKS -------------------------------------------
ENDED 20 WEEKS 32 WEEKS 20 WEEKS 40 WEEKS
--------------------------- ENDED ENDED ENDED ENDED
OCTOBER 30, OCTOBER 29, MARCH 21, OCTOBER 28, AUGUST 5, AUGUST 3,
1993 1994 1995 1995 1995 1996
----------- ----------- ---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Sales..................... $ 2,330,231 $ 2,409,911 $958,742 $ 1,474,982 $ 930,351 $1,900,550
Cost of sales............. 1,814,951 1,871,535 747,561 1,136,600 719,738 1,463,514
---------- ---------- -------- ---------- ---------- ----------
Gross profit.............. 515,280 538,376 211,181 338,382 210,613 437,036
Selling, general and
administrative
expenses................ 469,499 484,288 191,999 293,872 185,152 372,376
SARs termination costs.... -- -- 26,152 -- -- --
---------- ---------- -------- ---------- ---------- ----------
Operating income (loss)... 45,781 54,088 (6,970) 44,510 25,461 64,660
Interest expense:
Interest expense,
excluding amortization
of deferred financing
costs................. 33,811 29,857 11,238 44,480 24,789 51,272
Amortization of deferred
financing costs....... 351 135 69 1,460 1,361 2,137
---------- ---------- -------- ---------- ---------- ----------
34,162 29,992 11,307 45,940 26,150 53,409
Income (loss) before
income taxes,
extraordinary loss and
cumulative effect of
accounting change....... 11,619 24,096 (18,277) (1,430) (689 ) 11,251
Income tax expense
(benefit)............... 4,026 9,236 (7,135) 1,933 1,373 8,138
---------- ---------- -------- ---------- ---------- ----------
Income (loss) before
extraordinary loss and
cumulative effect of
accounting change....... 7,593 14,860 (11,142) (3,363) (2,062 ) 3,113
Extraordinary loss on
extinguishment of debt,
net of applicable tax
benefit of $3,896 in
fiscal 1994 and $2,824
in the 1995 periods..... -- (6,324) -- (4,585) (4,585 ) --
Cumulative effect of
accounting change....... -- (1,019) -- -- -- --
---------- ---------- -------- ---------- ---------- ----------
Net income (loss)......... $ 7,593 $ 7,517 $(11,142) (7,948) (6,647 ) 3,113
========== ========== ========
Preferred stock
accretion............... 3,722 2,265 5,229
---------- ---------- ----------
Net loss available to
common stockholders..... $ (11,670) $ (8,912 ) $ (2,116 )
========== ========== ==========
PER SHARE DATA
Loss before extraordinary
loss.................... $ (0.46) $ (0.29 ) $ (0.14 )
Extraordinary loss........ (0.30) (0.30 ) --
---------- ---------- ----------
Loss per common share..... $ (0.76) $ (0.59 ) $ (0.14 )
========== ========== ==========
Average number of shares
outstanding............. 15,414,721 15,360,811 15,491,502
========== ========== ==========
</TABLE>

See accompanying notes.

F-4
<PAGE> 61

DOMINICK'S SUPERMARKETS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
-------------------- PAID-IN EARNINGS
PREDECESSOR COMPANY SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
---------- ------ ---------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE AT OCTOBER 31, 1992.............. 265,300 $ 26 $ 573 $102,896 $103,495
Net income............................... -- -- -- 7,593 7,593
Cash dividend -- $2.00 per share......... -- -- -- (531) (531)
Common stock purchased and retired....... (1,000) -- (177) (136) (313)
--------- --- -------- -------- --------
BALANCE AT OCTOBER 30, 1993.............. 264,300 26 396 109,822 110,244
Net income............................... -- -- -- 7,517 7,517
Cash dividend -- $3.00 per share......... -- -- -- (793) (793)
Common stock purchased and retired....... (700) -- (62) (233) (295)
--------- --- -------- -------- --------
BALANCE AT OCTOBER 29, 1994.............. 263,600 26 334 116,313 116,673
Net loss................................. -- -- -- (11,142) (11,142)
Cash dividend -- $3.00 per share......... -- -- -- (791) (791)
--------- --- -------- -------- --------
BALANCE AT MARCH 21, 1995................ 263,600 $ 26 $ 334 $104,380 $104,740
========= === ======== ======== ========
COMPANY
BALANCE AT MARCH 22, 1995
Issuance of common stock................. 14,985,610 $150 $ 104,850 $ -- $105,000
Net income (loss)........................ -- -- -- (7,948) (7,948)
Preferred stock accretion................ -- -- -- (3,722) (3,722)
Other.................................... 445,287 4 2,889 -- 2,893
--------- --- -------- -------- --------
BALANCE AT OCTOBER 28, 1995.............. 15,430,897 154 107,739 (11,670) 96,223
--------- --- -------- -------- --------
Net income (unaudited)................... -- -- -- 3,113 3,113
Preferred stock accretion (unaudited).... -- -- -- (5,229) (5,229)
Other (unaudited)........................ 16,102 -- (51) -- (51)
--------- --- -------- -------- --------
BALANCE AT AUGUST 3, 1996 (UNAUDITED).... 15,446,999 $154 $ 107,688 $(13,786) $ 94,056
========= === ======== ======== ========
</TABLE>

See accompanying notes.

F-5
<PAGE> 62

DOMINICK'S SUPERMARKETS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
PREDECESSOR COMPANY COMPANY
------------------------------------- ---------------------------------------
52 WEEKS
ENDED 20 WEEKS 32 WEEKS 20 WEEKS 40 WEEKS
------------------------- ENDED ENDED ENDED ENDED
OCTOBER 30, OCTOBER 29, MARCH 21, OCTOBER 28, AUGUST 5, AUGUST 3,
1993 1994 1995 1995 1995 1996
----------- ----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).......................... $ 7,593 $ 7,517 $(11,142 ) $ (7,948 ) $ (6,647 ) $ 3,113
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Extraordinary loss on debt
extinguishment......................... -- -- -- 7,409 7,409 --
Depreciation and amortization............ 51,075 52,862 20,499 25,364 17,740 34,722
Amortization of deferred financing
costs.................................. 351 135 69 1,460 1,361 2,137
Stock appreciation rights................ 369 1,966 26,825 -- -- --
Deferred income taxes.................... (2,194) (645) (3,890 ) 7,625 -- --
Cumulative effect of accounting change... -- 1,019 -- -- -- --
Loss (gain) on disposal of capital
assets................................. 1,948 74 1,149 (25 ) -- 5
Changes in operating assets and
liabilities, net of acquisition:
Receivables............................ (788) 6,794 2,546 (5,218 ) (775 ) 13,427
Inventories............................ 8,862 (10,780) 7,209 (683 ) 21,493 2,918
Prepaid expenses....................... (643) 1,072 (1,890 ) 2,783 279 (2,063)
Accounts payable....................... 13,623 10,296 (10,217 ) 31,246 (7,698 ) (30,148)
Accrued liabilities and taxes
payable.............................. 9,659 2,848 (11,147 ) (241 ) 7,799 8,324
------- ------- -------- ---------- -------- --------
Total adjustments...................... 82,262 65,641 31,153 69,720 47,608 29,322
------- ------- -------- ---------- -------- --------
Net cash provided by operating
activities............................... 89,855 73,158 20,011 61,772 40,961 32,435
CASH FLOWS FROM INVESTING ACTIVITIES
Construction advances...................... 2,560 1,949 -- -- -- --
Proceeds from sale of capital assets....... 929 3,995 380 1,317 -- 293
Capital expenditures....................... (31,100) (60,056) (22,423 ) (23,125 ) (9,479 ) (25,264)
Proceeds from sale of investments.......... -- -- 7,300 -- -- --
Business acquisition cost, net of cash
acquired................................. -- -- -- (442,777 ) (442,777 ) --
Other -- net............................... (272) (1,406) 116 (31 ) 34 --
------- ------- -------- ---------- -------- --------
Net cash (used in) investing activities.... (27,883) (55,518) (14,627 ) (464,616 ) (452,222 ) (24,971)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments for long-term debt and
capital lease obligations................ (49,509) (68,303) (5,363 ) (131,145 ) (129,300 ) (20,052)
Proceeds from sale-leaseback of assets..... -- -- -- -- -- 24,702
Proceeds from debt issuances............... -- 40,214 -- 480,000 480,000 --
Proceeds from issuance of capital stock.... -- -- -- 100,000 100,000 --
Debt issuance costs and other.............. (1,049) (1,329) (791 ) (7,784 ) (7,905 ) (838)
------- ------- -------- ---------- -------- --------
Net cash (used in) provided by financing
activities............................... (50,558) (29,418) (6,154 ) 441,071 442,795 3,812
------- ------- -------- ---------- -------- --------
Net increase (decrease) in cash and cash
equivalents.............................. 11,414 (11,778) (770 ) 38,227 31,534 11,276
Cash and cash equivalents at beginning of
period................................... 18,458 29,872 18,094 17,324 17,324 55,551
------- ------- -------- ---------- -------- --------
Cash and cash equivalents at end of
period................................... $29,872 $18,094 $ 17,324 $ 55,551 $ 48,858 $ 66,827
======= ======= ======== ========== ======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Acquisition of business:
Fair value of assets acquired, net of
cash acquired.......................... $1,056,627 $1,056,627
Net cash paid in acquisition............. (442,777 ) (442,777 )
Exchange of capital stock................ (40,000 ) (40,000 )
Management equity investment............. (5,000 ) (5,000 )
---------- --------
Liabilities assumed...................... $ 568,850 $ 568,850
========== ========
Contribution of capital in exchange for
debt financing fees...................... $ 2,647 $ 2,647
========== ========
Preferred stock accretion.................. $ 3,722 $ 2,265 $ 5,229
========== ======== ========
</TABLE>

See accompanying notes.

F-6
<PAGE> 63

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Dominick's Supermarkets, Inc. (the "Company") acquired Dominick's Finer
Foods, Inc. ("Dominick's") on March 22, 1995 for total consideration of
approximately $692.9 million (excluding the Company's fees and expenses of
approximately $41.2 million) in a transaction accounted for as a purchase (the
"Acquisition"). The Company effected the Acquisition by acquiring 100% of the
capital stock of Dominick's parent, DFF Supermarkets, Inc. ("DFF"), formerly
known as Dodi Inc. ("Dodi") for $346.6 million in cash and $40 million of the
Company's 15% Redeemable Exchangeable Cumulative Preferred Stock ("Redeemable
Preferred Stock"). In addition, the Company repaid $34.3 million of secured
promissory notes issued by Dominick's prior to the Acquisition to discharge all
obligations under its stock appreciation rights ("SARs") plan and to repurchase
shares of Dominick's restricted stock held by certain management employees. In
connection with the Acquisition, the Company refinanced $135.7 million of
Dominick's existing indebtedness (including premiums and accrued interest)
assumed $124.5 million of existing capital leases and other indebtedness and
paid $11.8 million of employment termination, seller advisory and other seller
fees and expenses. The principal sources of cash to finance the Acquisition were
(i) $330 million in term loans consisting of $140 million of six-year amortizing
Tranche A Loans, $60 million of seven-year amortizing Tranche B Loans, $65
million of eight-year amortizing Tranche C Loans and $65 million of eight and
one-half year amortizing Tranche D Loans (collectively, the "Term Loan
Facilities); (ii) a $150 million unsecured senior subordinated credit facility;
and (iii) a $105 million equity investment in Company common stock by certain
affiliates of The Yucaipa Companies ("Yucaipa"), certain institutional and
private investors and certain members of the Dominick's management. On May 4,
1995, Dominick's used the proceeds of an offering (the "Note Offering") of $200
million of 10.875% Senior Subordinated Notes due 2005 (the "Senior Subordinated
Notes") to repay the $150 million unsecured senior subordinated credit facility
and to prepay $50 million of the Term Loan Facilities. In addition, Dominick's
obtained a $100 million revolving credit facility (the "Revolving Credit
Facility") available for working capital and general corporate purposes
(together with the Term Loan Facilities, the "Credit Facility").

The Acquisition was accounted for as a purchase of Dominick's by the
Company. As a result, all financial statements for periods subsequent to March
22, 1995, the date the Acquisition was consummated, will reflect Dominick's
assets and liabilities at their estimated fair market values as of March 22,
1995. The purchase price in excess of the fair market value of the Company's
assets was recorded as goodwill and is being amortized over a 40-year period.
For purposes of the financial statement presentation set forth herein, the
Predecessor Company refers to Dominick's prior to the consummation of the
Acquisition.

F-7
<PAGE> 64

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A summary of the assets acquired and liabilities assumed as of March 22,
1995 is as follows (dollars in thousands):

<TABLE>
<S> <C>
Assets
Inventory.............................................................. $ 182,439
Other current assets................................................... 37,632
Property and equipment, net............................................ 345,303
Goodwill............................................................... 438,150
Deferred financing costs............................................... 22,722
Other intangible assets................................................ 30,381
----------
Total Assets........................................................ $1,056,627
==========
Liabilities
Accounts payable and accrued expenses.................................. $ 299,198
Long-term debt......................................................... 237,511
Other liabilities...................................................... 32,141
----------
Total Liabilities................................................... $ 568,850
==========
</TABLE>

The following unaudited pro forma information presents the results of the
Company's operations adjusted primarily to reflect interest expense and
depreciation and amortization, as though the Acquisition had been made at the
beginning of each period (dollars in thousands):

<TABLE>
<CAPTION>
52 WEEKS ENDED
---------------------------
OCTOBER 29, OCTOBER 28,
1994 1995
----------- -----------
<S> <C> <C>
Sales......................................................... $ 2,409.9 $ 2,433.7
Loss before extraordinary loss and
cumulative effect of accounting change...................... (8.9) (6.0)
Net loss...................................................... (16.2) (10.6)
Net loss available to common stockholders..................... (22.5) (16.9)
</TABLE>

The Company uses a 52-53 week fiscal year ending on the Saturday closest to
October 31. The Company operates supermarkets in Chicago, Illinois, and its
suburbs. The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries.

Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

Inventories

Inventories are stated at the lower of cost, primarily using the last-in,
first-out (LIFO) method, or market. If inventories had been valued using
replacement cost, inventories would have been higher by $22,511,000 at October
28, 1994 and $1,937,000 at October 28, 1995, and gross profit and operating
income would have been greater by $435,000, $1,089,000, $750,000 and $1,694,000
for fiscal year 1993, fiscal year 1994, the 20 weeks ended March 21, 1995, and
the 32 weeks ended October 28, 1995, respectively.

F-8
<PAGE> 65

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Pre-Opening Costs

The costs associated with opening new and remodeled stores are deferred and
amortized over one year following the opening of each new store.

Property and Equipment

Property and equipment, including buildings capitalized under capital
leases, are recorded at cost. Depreciation and amortization is computed on the
straight-line method over the following estimated useful lives:

<TABLE>
<S> <C>
Buildings and improvements.............................. 10-33 years
Fixture and equipment................................... 3-12 years
Property under capital leases and lease rights.......... 15-25 years
</TABLE>

Deferred Financing Costs

Costs incurred in connection with the issuance of debt are amortized over
the term of the related debt using the effective interest method.

Goodwill and Trademarks

The excess of the purchase price over the fair value of the net assets
acquired is amortized on a straight-line basis over 40 years beginning at the
date of acquisition. Current and undiscounted future operating cash flows are
compared to current and undiscounted future goodwill amortization on a periodic
basis (not less than annually) to determine if an impairment of goodwill has
occurred. Trademarks, which are included in other assets, are amortized on a
straight-line basis over 40 years. Accumulated amortization related to goodwill
and trademarks at October 28, 1995 was $6,342,000 and $523,000, respectively.

Income Taxes

The Company changed its method of accounting for income taxes from the
deferred method to the liability method as required by the Financial Accounting
Standards Board Statement No. 109, Accounting for Income Taxes. As permitted by
Statement 109, prior-year financial statements have not been restated to reflect
the change in accounting method. The cumulative effect on prior years of
adopting Statement 109 as of October 31, 1993 was to decrease 1994 net income by
$1,019,000. Under Statement 109, deferred income taxes reflect the net tax
effect of temporary differences between the carrying amounts of assets and
liabilities used for financial reporting purposes and the amounts used for
income tax purposes.

Closed Store Reserves

The Company provides a reserve for the net book value of any store assets,
net of salvage value, and the net present value of the remaining lease
obligation, net of estimated sublease income for stores that have closed or are
expected to close. Included in liabilities assumed in the purchase price
allocation are certain closed store reserves. Such reserves were $24.2 million
at October 28, 1995.

Self-Insurance Reserves

The Company is self-insured for its workers' compensation and general
liability claims. The Company establishes reserves based on an independent
actuary's review of claims filed and an estimate of claims incurred but not yet
filed.

F-9
<PAGE> 66

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Discounts and Promotional Allowances

Promotional allowances and vendor discounts are recorded as a reduction of
cost of sales in the accompanying consolidated statements of operations.
Allowance proceeds received in advance are deferred and recognized over the
period earned.

Extraordinary Loss

During fiscal year 1994, the Predecessor Company retired $60 million of its
11.78% Senior Notes, which resulted in a net loss on early extinguishment of
debt of $6,324,000 net of applicable tax benefit of $3,896,000. During fiscal
year 1995, the Company used the proceeds from the Note Offering to repay in full
the $150 million senior subordinated credit facility and to prepay $50 million
of its Term Loan Facilities which resulted in a net loss on early extinguishment
of debt of $4,585,000, net of tax benefit of $2,824,000. The accompanying
financial statements reflect both of these charges as extraordinary items.

Advertising

The Company expenses its advertising costs as incurred. Advertising
expenses were $29,252,000, $30,086,000, $11,472,000 and $16,540,000 for fiscal
year 1993, fiscal year 1994, the 20 weeks ended March 21, 1995 and the 32 weeks
ended October 28, 1995, respectively.

Income (Loss) Per Common Share

Income (loss) per common share is computed based upon the weighted average
number of shares outstanding during the period. Income (loss) per common share
is computed based upon net income or loss adjusted for accretion on preferred
stock.

In accordance with the rules of the Securities and Exchange Commission,
85,998 shares of common stock issued after March 21, 1995 and 29,499 equivalent
shares using the treasury stock method for outstanding stock options granted
after March 21, 1995 have been treated as outstanding for all subsequent periods
in calculating earnings per share because such shares were issued and such
options are exercisable at prices below the assumed initial public offering
price.

Supplemental Cash Flow Disclosure

Cash paid for income taxes was $6,936,000, $5,555,000, $3,115,000 and
$4,230,000 for fiscal year 1993, fiscal year 1994, the 20 weeks ended March 21,
1995 and the 32 weeks ended October 28, 1995, respectively. Interest payments
were $37,625,000, $37,704,000, $15,835,000 and $35,638,000 for fiscal year 1993,
fiscal year 1994, the 20 weeks ended March 21, 1995 and the 32 weeks ended
October 28, 1995, respectively. Capital lease obligations of $3,422,000 and
$235,000 were entered into in fiscal year 1993 and fiscal year 1994,
respectively. None were entered into in fiscal year 1995.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Reclassifications

Certain amounts in the 1993 and 1994 consolidated financial statements have
been reclassified to conform to the October 28, 1995 presentation.

F-10
<PAGE> 67

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

New Accounting Pronouncements

In March 1995, the Financial Accounting Standards Board issued Statement
No. 121 Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amounts. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company will adopt Statement 121 in fiscal 1997 and, based on current
circumstances, does not believe the effect of the adoption will be material.

The Financial Accounting Standards Board issued Statement No. 123
Accounting for Stock Based Compensation, which allows the adoption of a fair
value based method of expense recognition for stock based compensation awards
granted to employees or allows companies to continue to apply APB 25 and
disclose pro forma net income and earnings per share calculated as if the
recognition and measurement provisions on a fair value basis of Statement 123
had been adopted. The Company intends to continue to apply APB 25 and make the
appropriate pro forma disclosure beginning in fiscal 1997.

Unaudited Interim Financial Statements

The accompanying consolidated balance sheet and the consolidated statements
of stockholders' equity as of August 3, 1996 (Company) and the consolidated
statements of operations and cash flows for the 20 week period ended August 5,
1995 (Predecessor Company) and the 40-week period ended August 3, 1996 (Company)
are unaudited and have been prepared on the same basis as the audited
consolidated financial statements included herein. In the opinion of management,
such unaudited consolidated financial statements include all adjustments
necessary to present fairly the information set forth therein, which consist
solely of normal recurring adjustments. The results of operations for such
interim period are not necessarily indicative of results for the full year.

2. PROPERTY AND EQUIPMENT

Property and equipment consists of the following (dollars in thousands):

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
----------- ---------------------------
OCTOBER 29, OCTOBER 28, AUGUST 3,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land..................................................... $ 27,500 $ 37,795 $ 35,952
Buildings and leasehold improvements..................... 146,870 72,518 71,693
Fixtures and equipment................................... 411,311 113,733 119,092
Capital leases........................................... 141,473 94,501 94,941
Construction in progress................................. 18,716 2,471 23,449
Lease rights............................................. 12,650 50,229 46,465
--------- -------- --------
758,520 371,247 391,592
Less: Accumulated depreciation and amortization.......... (328,821) (18,232) (40,803)
--------- -------- --------
$ 429,699 $ 353,015 $ 350,789
========= ======== ========
</TABLE>

Accumulated depreciation and amortization related to capital leases,
primarily for certain buildings, was $57,086,000 at October 29, 1994, $5,072,584
at October 28, 1995 and $13,056,000 at August 3, 1996. Accumulated amortization
related to lease rights was $6,001,000 at October 29, 1994, $1,667,722 at
October 28, 1995 and $3,386,000 at August 3, 1996.

F-11
<PAGE> 68

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. LONG-TERM DEBT

Long-term senior debt consists of the following (dollars in thousands):

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
----------- ---------------------------
OCTOBER 29, OCTOBER 28, AUGUST 3,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Tranche A Loans, principal due quarterly through 2001,
with interest payable quarterly........................ $ -- $ 105,574 $ 98,478
Tranche B Loans, principal due quarterly through March
2002, with interest payable quarterly.................. -- 54,807 54,012
Tranche C Loans, principal due quarterly through March
2003, with interest payable quarterly.................. -- 59,374 58,629
Tranche D Loans, principal due quarterly through
September 2003, with interest payable quarterly........ -- 59,374 58,680
Revolving Credit Facility................................ 40,000 -- --
11.78% Senior Notes...................................... 90,000 -- --
Other.................................................... 12,839 11,751 6,098
-------- -------- --------
142,839 290,880 275,897
Less: Current portion.................................... 862 9,771 2,108
-------- -------- --------
$ 141,977 $ 281,109 $ 273,789
======== ======== ========
</TABLE>

In connection with the Acquisition, the Company and its subsidiaries
entered into the Credit Facility with a syndicate of financial institutions. The
Credit Facility initially provided for (i) term loans in the aggregate amount of
$330 million, comprised of the $140 million Tranche A Loans, the $60 million
Tranche B Loans, the $65 million Tranche C Loans, and the $65 million Tranche D
Loans; and (ii) the $100 million Revolving Credit Facility under which working
capital loans may be made and commercial or standby letters of credit in the
maximum aggregate amount of up to $30 million may be issued. At October 28,
1995, no amount was outstanding under the Revolving Credit Facility and $19.2
million of standby letters of credit had been issued on behalf of the Company.

Borrowings under (i) the Revolving Credit Facility and the Tranche A Loans
bear interest at a rate equal to the Base Rate (as defined in the loan
agreement) plus a 1.50% per annum or the reserve adjusted Euro-Dollar Rate (as
defined in the loan agreement) plus 2.75% per annum; (ii) the Tranche B Loans
bear interest at the Base Rate plus 2.00% per annum or the reserve adjusted
Euro-Dollar Rate plus 3.25% per annum; (iii) the Tranche C Loans bear interest
at the Base Rate plus 2.50% per annum or the reserve adjusted Euro-Dollar Rate
plus 3.75% per annum; and (iv) the Tranche D Loans bear interest at the Base
Rate plus 2.75% per annum or the reserve adjusted Euro-Dollar Rate plus 4.00%
per annum, in each case as selected by the Company. The Company will pay the
issuing bank a fee of 0.25% per annum (but not less than $500) on each standby
letter of credit and commercial letter of credit and will pay the lenders under
the Credit Facility a letter of credit fee of 2.25% per annum for standby
letters of credit and a fee equal to 1.25% per annum for commercial letters of
credit. In addition, the Company will pay a commitment fee of 0.50% per annum on
the unused portions of the Revolving Credit Facility.

In connection with the original issuance of the Senior Subordinated Notes,
the Company entered into certain amendments to the Credit Facility (the "Credit
Facility Amendments") in order to, among other things, modify the mandatory
prepayment provisions of the Credit Facility. After giving effect to these
modifications, $50 million of proceeds from the Note Offering were applied to
prepay $34.4 million of the

F-12
<PAGE> 69

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Tranche A Loans, $4.9 million of the Tranche B Loans, $5.3 million of the
Tranche C Loans and $5.3 million of the Tranche D Loans.

The Tranche A Loans mature on March 31, 2001 and are subject to
amortization on a quarterly basis, commencing on June 30, 1996, in aggregate
annual amounts of $4.6 million in the second year of the facility, $9.2 million
in the third year, $23.0 million in the fourth year, $27.5 million in the fifth
year, and $41.3 million in the sixth year. The Tranche B Loans mature on March
31, 2002 and are subject to amortization on a quarterly basis, commencing on
June 30, 1995, in aggregate annual amounts of $551,000 for the first six years
and $51.8 million in the seventh year. The Tranche C Loans mature on March 31,
2003 and are subject to amortization on a quarterly basis, commencing on June
30, 1995, in aggregate annual amounts of $597,000 for the first seven years and
$55.5 million in the eighth year. The Tranche D Loans mature on September 30,
2003 and are subject to amortization on a quarterly basis in aggregate annual
amounts of $597,000 for the first eight years and $54.9 million in the ninth
year. The amortization requirements described above give effect to the Credit
Facility Amendments and the application of $50 million of Note Offering proceeds
to prepay the Term Loan Facilities. The Revolving Credit Facility will mature on
March 31, 2001.

The debt agreements, among other things, require the Company to maintain
minimum levels of net worth (as defined), to maintain minimum levels of earnings
(as defined), to maintain a hedge agreement to provide interest rate protection,
and to comply with certain ratios related to interest expense (as defined),
fixed charges (as defined) and indebtedness (as defined). In addition, the debt
agreements limit, among other things, additional borrowings, dividends on, and
redemption of, capital stock, certain other payments to DFF and Supermarkets,
capital expenditures, incurrence of lease obligations, and the acquisition and
disposition of assets. At October 28, 1995, the Company was in compliance with
the financial covenants of its debt agreements. At October 28, 1995, the Company
was restricted from paying dividends on its capital stock under the terms of the
debt agreements.

Substantially all of the assets of the Company and its subsidiaries are
pledged as security under the Credit Facility or other long-term debt.

Maturities of long-term debt at October 28, 1995, excluding capital lease
obligations, for each of the next five fiscal years are as follows (dollars in
thousands):

For the period ended October 28, 1995, the Company's effective interest
rate was 10.5%.

Senior Subordinated Notes

On May 4, 1995, the Company issued $200 million principal amount of Senior
Subordinated Notes in connection with the Acquisition. The Senior Subordinated
Notes bear interest, payable semi-annually on May 1 and November 1, at an annual
rate of 10.875%. The Senior Subordinated Notes, which are due on May 1, 2005,
are subordinated to all Senior Indebtedness (as defined) of the Company, and may
be redeemed beginning in fiscal year 2000 at a redemption price of 104.833%. The
redemption price declines ratably to 100% in fiscal 2004. In addition, on or
prior to May 1, 1998, the Company may, at its option, use the net cash proceeds
of one or more Public Equity Offerings (as defined) to redeem up to an aggregate
of 33 1/3% of the principal amount of the originally issued Senior Subordinated
Notes at redemption prices of 110.875% in 1995, declining ratably to 108.458% in
1997.

F-13
<PAGE> 70

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. LEASES

The Company leases land, retail stores, and equipment. Many of the property
leases obligate the Company to pay real estate taxes, insurance, and maintenance
costs and contain multiple renewal options generally covering additional periods
ranging from 15 to 30 years. Many of the leases require contingent rental
payments, which are based primarily upon sales at the various retail stores,
adjusted for certain expenses paid by the Company. Rent expense totaled
$17,188,000 including $263,000 for contingent rentals, for fiscal year 1993,
$17,704,000 and $275,000 respectively for fiscal year 1994, $6,511,000 and
$167,000, respectively for the 20 weeks ended March 21, 1995 and $10,419,000 and
$271,000, respectively for the 32 weeks ended October 28, 1995.

The future minimum lease payments under noncancelable operating and capital
leases, as of October 28, 1995 for each of the next five fiscal years and
thereafter, are as follows (dollars in thousands):

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
<S> <C> <C>
1996.......................................................... $ 16,300 $ 18,440
1997.......................................................... 16,001 18,414
1998.......................................................... 16,017 18,354
1999.......................................................... 16,001 18,301
2000.......................................................... 16,361 17,945
Thereafter.................................................... 126,831 129,079
-------- --------
Total minimum lease payments.................................. $ 207,511 220,533
========
Less: Amount representing interest............................ (112,047)
--------
Present value of net minimum lease payments................... $ 108,486
========
</TABLE>

The present value of net minimum lease payment includes $29,419,000 due to
related parties.

5. CAPITAL STOCK

The authorized capital stock of the Company consists of 36,594,895 shares
of Common Stock $.01 par value common stock and 36,594,895 shares of Class B
$.01 par value common stock. All common stock is entitled to dividends, if any,
as may be declared by the Board of Directors. Certain dividend restrictions
exist as more fully described in Note 3. The Common Stock is voting, and the
Class B Common Stock is non-voting. Additionally, the Class B Common Stock is
convertible at the option of the holder, on a one-for-one basis, into Common
Stock if certain conditions are met.

Each member of management holding shares of common stock or holding stock
options (collectively the "Management Stockholders") have signed a stockholders
agreement (the "Agreement"). The Agreement, among other things, provides the
company with a right of first refusal to purchase stock subject to a proposed
sale by a Management Stockholder. The Agreement also provides the Company with
an option, in certain events as defined, to repurchase stock owned by Management
Stockholders under a company stock option. The Agreement will terminate upon an
initial public offering of the Company's Common Stock if certain conditions are
met.

Stock Option Plans

The Company maintains a stock option plan (the "Plan") for the officers and
key employees which provides for non-qualified and incentive options. The Board
of Directors determines the option price (not to be less than fair value for
incentive options) at the date of grant. The options generally expire on the
tenth

F-14
<PAGE> 71

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

anniversary of their respective grant date and become exercisable over a
specified vesting period. The total number of shares that may be issued under
the Plan is 1,116,144.

A summary of stock option activity is as follows:

<TABLE>
<CAPTION>
NUMBER OF
SHARES
---------
<S> <C>
Grants at March 22, 1995.......................................... 926,473
Granted......................................................... 43,914
Exercised....................................................... --
Cancelled....................................................... --
--------
Outstanding at October 28, 1995................................... 970,387
========
</TABLE>

Of the options outstanding at October 28, 1995, 459,516 were non-qualified
options and 510,871 were incentive options. All of the incentive options have an
option price per share of $6.83 and all of the non-qualified options have an
option price per share of $1.71. As of October 28, 1995 459,516 shares were
exercisable and 145,757 shares were available for future grants under the Plan.

The Company follows Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees (APB 25), and related interpretations in
accounting for its stock options. Under APB 25, when the exercise price of
employee stock options equals or exceeds the market price of the underlying
stock on the date of grant, no compensation expense is recognized.

Warrant

At the time of the Acquisition, the Company issued to Yucaipa a warrant
(the "Warrant") to purchase up to 3,874,492 shares of Common Stock at an
exercise price of $20.732 per share. The Warrant is exercisable only in the
event of an initial public offering that meets certain conditions or in
connection with certain sales transactions (collectively the "Trigger Events")
on or prior to March 22, 2000.

The Warrant terminates on March 22, 2000. In the event that certain
financial performance conditions are met, however, both the termination date and
the deadline for a Trigger Event may be extended. Additionally, the Warrant is
exercisable without the payment of cash consideration, pursuant to which the
Company will withhold from the shares otherwise issuable upon exercise thereof,
the number of shares having a market value as of the exercise date equal to the
exercise price.

The Predecessor Company had a SARs plan for certain officers and key
management employees. The plan provided for additional compensation to be
accrued on the difference between the book value per share of common stock at
the end of each fiscal year and the book value per share at the later of the
grant date or the last day of the prior fiscal year. As a result of the
Acquisition, the SARs became fully vested and were valued at market value.
Compensation expense incurred related to all SARs outstanding was $369,000 in
fiscal year 1993, $1,966,000 in fiscal year 1994 and $673,000 during the 20
weeks ended March 21, 1995. In connection with the Acquisition, all obligations
under the Company's stock appreciation rights plan were discharged and the plan
was terminated. As a result of the Acquisition, the Company recorded a charge of
$26,152,000, reflecting the difference in fair market value and book value of
the SARs at March 21, 1995.

6. REDEEMABLE EXCHANGEABLE CUMULATIVE PREFERRED STOCK

The Company has designated 40,000 of its 200,000 authorized preferred
shares as 15% Redeemable Exchangeable Cumulative Preferred Stock Series A (the
"Preferred Stock"). The remaining 160,000 shares have not been designated.

F-15
<PAGE> 72

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In connection with the Acquisition, the Company issued 40,000 shares of the
Preferred Stock. The holders of the Preferred Stock are entitled to cumulative
dividends, when and if declared by the Board of Directors, and preference in
liquidation over holders of common stock at $1,000 per share plus accrued but
unpaid dividends, if any. Except in limited circumstances, the holders of the
Preferred Stock have no voting rights.

The Company is required to redeem the Preferred Stock at the earlier of a
change in control (as defined) and March 22, 2007 at $1,000 per share plus
accrued but unpaid dividends, if any (the "Redemption Price"). Prior to the
mandatory redemption, the Company may redeem all or any portion of the preferred
stock at the Redemption Price.

The Company, at its sole option, may exchange the Preferred Stock for 15%
Junior Subordinated Debentures due 2007 having such terms and conditions as
shall be first approved by a majority of the holders of the Preferred Stock. In
addition, the holders of the Preferred Stock are entitled to certain demand
registration rights commencing March 22, 1997.

7. INCOME TAXES

The provision (benefit) for income taxes consists of the following (dollars
in thousands):

<TABLE>
<CAPTION>
COMPANY
PREDECESSOR COMPANY -----------
-----------------------------------------
52 WEEKS ENDED 20 WEEKS 32 WEEKS
--------------------------- ENDED ENDED
OCTOBER 30, OCTOBER 29, MARCH 21, OCTOBER 28,
1993 1994 1995 1995
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Current:
Federal..................................... $ 5,188 $ 8,296 $(2,543) $(4,539)
State....................................... 1,032 1,585 (702) (1,153)
------- ------ ------- -------
6,220 9,881 (3,245) (5,692)
Deferred:
Federal..................................... (1,718) (300) (3,027) 6,214
State....................................... (476) (345) (863) 1,411
------- ------ ------- -------
(2,194) (645) (3,890) 7,625
------- ------ ------- -------
$ 4,026 $ 9,236 $(7,135) $ 1,933
======= ====== ======= =======
</TABLE>

A reconciliation of the provision for income taxes to amounts computed at the
federal statutory rates of 34.83% for fiscal 1993, and 35% for fiscal 1994 and
fiscal 1995 is as follows (dollars in thousands):

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------------------------------------- COMPANY
-----------
52 WEEKS ENDED 20 WEEKS 32 WEEKS
--------------------------- ENDED ENDED
OCTOBER 30, OCTOBER 29, MARCH 21, OCTOBER 28,
1993 1994 1995 1995
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Federal income taxes at statutory rate on
income before provision for income taxes,
extraordinary loss and cumulative effect of
accounting change........................... $ 4,047 $ 8,434 $(6,397) $ (501)
Non-tax deductible goodwill amortization...... -- -- -- 2,417
State income taxes, net of federal income tax
benefit..................................... 363 805 (828) 10
Other, net.................................... (384) (3) 90 7
------ ------ ------- ------
Total income tax expense............ $ 4,026 $ 9,236 $(7,135) $ 1,933
====== ====== ======= ======
</TABLE>

F-16
<PAGE> 73

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Significant components of the Company's deferred income tax liabilities and
assets as of October 29, 1994 and October 28, 1995 are as follows (dollars in
thousands):

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
----------- -------
1994 1995
----------- -------
<S> <C> <C>
Deferred income tax liabilities:
Inventory............................................ $ 2,663 $10,773
Property and equipment............................... 49,508 25,972
State income taxes................................... 5,532 1,989
Trademarks........................................... -- 8,917
Other................................................ 776 3,521
-------- --------
Total deferred income tax liabilities.................. 58,479 51,172
Deferred income tax assets:
Accrued vacation..................................... 2,798 2,830
Capital leases....................................... 8,240 3,937
Alternative minimum tax.............................. 6,677 6,386
Accrued self-insurance............................... 10,313 15,245
Capitalized inventory................................ 2,183 2,111
Accrued stock appreciation rights.................... 1,006 --
Other accrued liabilities............................ -- 20,963
Other................................................ 2,812 4,775
-------- --------
Total deferred income tax assets....................... 34,029 56,247
-------- --------
Net deferred income tax liabilities (assets)........... 24,450 (5,075)
Less valuation allowance............................. -- 11,120
-------- --------
Net deferred income tax liabilities.................... $24,450 $ 6,045
======== ========
</TABLE>

At October 29, 1994, the Predecessor Company did not record a valuation
allowance as the estimated amount of deferred income tax assets were deemed to
be fully realizable.

8. PROFIT-SHARING AND RETIREMENT PLANS

The Company has trusteed, contributory, profit-sharing plans (the "Plans")
covering substantially all full-time employees. Plan participants are allowed to
contribute a specified percentage of their compensation into the Plans. The
amount of the Company's contribution is at the discretion of the Board of
Directors, subject to limitations of the Plans.

Under the provisions of several collective bargaining agreements covering
hourly paid employees, the Company is required to make pension contributions to
multi-employer retirement plans based primarily on hours worked by such
employees.

Retirement and profit-sharing plan expenses included in the consolidated
statements of operations were $14,217,000 for the fiscal year 1993, $14,572,000
for fiscal year 1994, and $5,950,000 for the 20 weeks ended March 21, 1995 and
$8,638,000 for the 32 weeks ended October 28, 1995.

9. RELATED PARTY TRANSACTIONS

The Company has a five-year consulting agreement with Yucaipa effective
March 22, 1995 for management and financial services. The agreement is
automatically renewed on April 1 of each year for the five-year term unless 90
days notice is given by either party. The agreement provides for annual
management

F-17
<PAGE> 74

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

fees equal to 2% of EBITDA (as defined in the consulting agreement). In
addition, the Company may retain Yucaipa in an advisory capacity in connection
with certain acquisition or sale transactions and in such case will pay an
advisory fee equal to 1% of the transaction value. Pursuant to the agreement,
Yucaipa received a fee of $14 million for advisory and other services provided
in connection with the Acquisition. Fees paid or accrued associated with
management services were $1,490,000 during the 32 weeks ended October 28, 1995.

10. COMMITMENTS AND CONTINGENCIES

On March 16, 1995, a lawsuit was filed against Dominick's by two former
employees of Dominick's. The plaintiffs' original complaint asserted allegations
of gender discrimination and sought compensatory and punitive damages in an
unspecified amount. The Company plans to vigorously defend this lawsuit. Based
upon the current state of the proceedings, the Company's assessment to date of
the underlying facts and circumstances and the other information currently
available, and although no assurances can be given, the Company does not believe
that the resolution of this litigation will have a material adverse effect on
the Company.

The Company is also a defendant in other cases currently in litigation or
potential claims encountered in the normal course of business which are being
vigorously defended. In the opinion of management, the resolution of these
matters will not have a material effect on the Company's financial position or
results of operations.

The Company self-insures its worker' compensation and general liability.
During fiscal year 1993, fiscal year 1994, and the 20 weeks ended March 21,
1995, the Company discounted its workers' compensation self-insurance liability
using a 7.5% discount rate. During the 32 weeks ended October 28, 1995, all
self-insurance liabilities were discounted using a 7.5% discount rate.
Management believes that this rate approximates the time value of money over the
anticipated payout period (approximately 12 years) for essentially risk-free
investments.

The Company's historical self-insurance liability for the three most recent
fiscal years is as follows (dollars in thousands):

<TABLE>
<CAPTION>
PREDECESSOR COMPANY COMPANY
--------------------------- -----------
OCTOBER 30, OCTOBER 29, OCTOBER 28,
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Self-insurance liability.................. $30,826 $33,235 $55,898
Less: Discount............................ (3,717) (3,985) (8,231)
------- ------- -------
Net self-insurance liability.............. $27,109 $29,250 $47,667
======= ======= =======
</TABLE>

The Company expects that cash payments for claims will aggregate
approximately $19 million, $12 million, $9 million, $6 million and $4 million
for its fiscal years 1996, 1997, 1998, 1999 and 2000, respectively.

F-18
<PAGE> 75

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the Company's financial instruments are as
follows (dollars in thousands):

<TABLE>
<CAPTION>
OCTOBER 28, 1995
-----------------------
CARRYING
AMOUNT FAIR VALUE
-------- ----------
<S> <C> <C>
Cash and cash equivalents.............................. $ 55,551 $ 55,551
Short-term notes and other receivables................. 25,314 25,314
Long-term debt for which it is:
-- Practical to estimate fair values................. 479,129 485,562
-- Not Practical..................................... 11,751 11,751
</TABLE>

The fair value of the Senior Subordinated Notes and the Senior Credit
Facilities are based on quoted market prices. Market quotes for the fair value
of the remainder of the Company's debt are not available. Additional information
pertinent to the value of the unquoted debt is provided in Note 3.

12. SUBSEQUENT EVENT

In August 1996, the Company filed a Registration Statement on Form S-1 with
the Securities and Exchange Commission relating to an initial public offering of
its common stock. In connection with the offering, the Company will record a
pre-tax charge of approximately $10.5 million related to the planned termination
of the consulting agreement with Yucaipa and an extraordinary loss of
approximately $6.4 million (net of applicable income tax benefit of $4.2
million) related to the write-off of deferred financing costs in connection with
the planned extinguishment of debt.

The Company also intends to split each share of its Common Stock and Class
B Common Stock into 14.638 shares of common stock to be effected immediately
prior to the effective date of the Registration Statement. The accompanying
financial statements are presented as if the stock split had occurred at the
date of the Acquisition.

The components of Redeemable Preferred Stock and stockholders' equity as of
August 3, 1996, assuming the redemption of the Redeemable Preferred Stock is as
follows:

<TABLE>
<CAPTION>
PRO FORMA
AUGUST 3,
HISTORICAL 1996
AUGUST 3, -----------
1996
---------- (UNAUDITED)
<S> <C> <C>
Redeemable Preferred Stock............................................ $ 48,951 $ --
Stockholders' equity:
Common Stock........................................................ 70 70
Class B Common Stock................................................ 84 84
Additional paid-in capital.......................................... 107,688 107,688
Retained deficit.................................................... (13,786) (13,786)
---------- ----------
Total stockholders' equity.................................. 94,056 94,056
---------- ----------
Total Redeemable Preferred Stock and stockholders' equity............. $1,143,887 $ 1,094,936
========== ==========
</TABLE>

F-19
<PAGE> 76

DOMINICK'S SUPERMARKETS, INC.

UNAUDITED PRO FORMA FINANCIAL STATEMENTS

The following unaudited pro forma financial statements of the Company for
the 52 weeks ended October 28, 1995 and the 40 weeks ended August 5, 1995, give
effect to the Acquisition and certain related events as if such transactions
occurred on October 30, 1994. See "The Acquisition."

The pro forma adjustments are based upon currently available information
and upon certain assumptions that management believes are reasonable. The
Acquisition has been accounted for as a purchase by the Company. The unaudited
pro forma financial statements are not necessarily indicative of either future
results of operations or results that might have been achieved if the foregoing
transactions had been consummated as of the indicated dates. The unaudited pro
forma financial statements should be read in conjunction with the historical
consolidated financial statements of the Company and the Predecessor Company,
together with the related notes thereto, included elsewhere in this Prospectus.

For purposes of the presentation of the unaudited pro forma consolidated
statements of operations, the "Predecessor Company" refers to Dominick's prior
to the consummation of the Acquisition.

P-1
<PAGE> 77

DOMINICK'S SUPERMARKETS, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

52 WEEKS ENDED OCTOBER 28, 1995
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------
PREDECESSOR COMPANY COMPANY PRO FORMA
------------------- --------------- -----------
20 WEEKS 32 WEEKS 52 WEEKS
ENDED ENDED ENDED
MARCH 21, OCTOBER 28, PRO FORMA OCTOBER 28,
1995 1995 ADJUSTMENTS 1995
------------------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Sales................................. $ 958.8 $ 1,475.0 $ -- $ 2,433.8
Cost of sales......................... 747.6 1,136.6 (2.5)(a) 1,881.7
------ -------- ------ --------
Gross profit.......................... 211.2 338.4 2.5 552.1
Selling, general and administrative
expenses............................ 191.9 287.6 (6.7)(a) 471.2
(1.6)(b)
SARs termination costs................ 26.2 -- (26.2) --
Amortization of goodwill.............. 6.3 4.7(c) 11.0
------ -------- ------ --------
Operating income (loss)............... (6.9) 44.5 32.3 69.9
Interest expense...................... 11.2 44.5 14.3(d) 70.0
Amortization of deferred financing
costs............................... 0.1 1.5 0.8(e) 2.4
------ -------- ------ --------
Income (loss) before income taxes and
extraordinary loss.................. (18.2) (1.5) 17.2 (2.5)
Income tax expense (benefit).......... (7.1) 1.9 8.7(f) 3.5
------ -------- ------ --------
Income (loss) before extraordinary
loss................................ $ (11.1) $ (3.4) $ 8.5 $ (6.0)
====== ======== ====== ========
</TABLE>

See accompanying notes.

P-2
<PAGE> 78

DOMINICK'S SUPERMARKETS, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

40 WEEKS ENDED AUGUST 5, 1995
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
HISTORICAL
--------------------------------
COMPANY
PREDECESSOR COMPANY -------- PRO FORMA
------------------- 20 WEEKS ---------
20 WEEKS ENDED 40 WEEKS
ENDED AUGUST ENDED
MARCH 21, 5, PRO FORMA AUGUST 5,
1995 1995 ADJUSTMENTS 1995
------------------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Sales................................... $ 958.8 $930.3 $ -- $1,889.1
Cost of sales........................... 747.6 719.7 (1.9)(a) 1,465.4
------ ------ ------ --------
Gross profit............................ 211.2 210.6 1.9 423.7
Selling, general and administrative
expenses.............................. 191.9 181.2 (5.0)(a) 366.5
(1.6)(b)
SARs termination costs.................. 26.2 -- (26.2) --
Amortization of goodwill................ -- 4.0 4.4(c) 8.4
------ ------ ------ --------
Operating income (loss)................. (6.9) 25.4 30.3 48.8
Interest expense........................ 11.2 24.8 18.3(d) 54.3
Amortization of deferred financing
costs................................. 0.1 1.3 0.4(e) 1.8
------ ------ ------ --------
Income (loss) before income taxes and
extraordinary loss.................... (18.2) (0.7) 11.6 (7.3 )
Income tax expense (benefit)............ (7.1) 1.3 6.5(f) 0.7
------ ------ ------ --------
Income (loss) before extraordinary
loss.................................. $ (11.1) $ (2.0) $ 5.1 $ (8.0 )
====== ====== ====== ========
</TABLE>

See accompanying notes.

P-3
<PAGE> 79

DOMINICK'S SUPERMARKETS, INC.

NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS)

(a) The purchase price allocation resulted in a reduction of the carrying value
of the Company's property and equipment. As a result, depreciation expense
on a pro forma basis is lower than the historical basis.

(b) Reflects the following adjustments:

<TABLE>
<CAPTION>
52 WEEKS ENDED 40 WEEKS ENDED
OCTOBER 28, 1995 AUGUST 5, 1995
---------------- --------------
<S> <C> <C>
Yucaipa management fees............................... $ 0.6 $ 0.6
Reduction of compensation expense resulting from
differences in management salaries and bonuses paid
to certain former management employees.............. (0.8) (0.8)
Reversal of SARs expense.............................. (0.7) (0.7)
Elimination of seller transaction expenses............ (0.8) (0.8)
Increased rent expense relating to the Excluded
Properties Leases entered into in connection with
the Acquisition..................................... 0.1 0.1
----- -----
$ (1.6) $ (1.6)
===== =====
</TABLE>

(c) Reflects the amortization, on a straight-line basis, of goodwill over a
40-year period. Current and undiscounted future operating cash flows will be
compared to current and future goodwill amortization to determine if an
impairment of goodwill has occurred.

(d) Pro forma interest expense has been calculated based upon pro forma debt
levels and the applicable interest rates. The Senior Subordinated Credit
Facility was assumed to have a fixed interest rate of 12.25% and be
outstanding for one month after the consummation of the Acquisition. One
month after the closing date, the Senior Subordinated Credit Facility is
assumed to have been refinanced with a portion of the proceeds from the
Senior Subordinated Notes being offered with a fixed interest rate of
10 7/8%. Pro forma interest expense on the Term Loan Facilities was
calculated on a monthly basis using an interest rate of 6.25% (LIBOR) plus
2.75% for Tranche A Loans, 3.25% for Tranche B Loans, 3.75% for Tranche C
Loans and 4.0% for Tranche D Loans.

(e) Reflects the net increase in amortization due to additional deferred
financing fees related to the increased levels of debt added in connection
with the Acquisition.

(f) Reflects elimination of income taxes as a result of the pro forma decrease
in pre-tax income. The pro forma income tax rate differs from the statutory
rate because goodwill amortization is not deductible for income tax
purposes.

P-4
<PAGE> 80

- ------------------------------------------------------
- ------------------------------------------------------

NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY OF THE SELLING STOCKHOLDERS OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.

-------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 9
Use of Proceeds............................ 13
Dividend Policy............................ 13
Dilution................................... 14
Capitalization............................. 15
Selected Historical and Pro Forma Financial
Data..................................... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 18
Business................................... 25
Management................................. 34
Principal and Selling Stockholders......... 42
Certain Transactions....................... 44
Description of Capital Stock............... 45
Shares Eligible for Future Sale............ 48
The Acquisition............................ 49
Description of Certain Indebtedness........ 50
Underwriting............................... 53
Legal Matters.............................. 55
Experts.................................... 55
Available Information...................... 55
Index to Financial Statements.............. F-1
Unaudited Pro Forma Financial Statements... P-1
</TABLE>

------------------------

UNTIL , 1996 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------

6,400,000 SHARES

DOMINICK'S LOGO

DOMINICK'S
SUPERMARKETS, INC.

COMMON STOCK

OMNI SUPERSTORE LOGO

------------------------

PROSPECTUS
------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

MORGAN STANLEY & CO.
INCORPORATED

BT SECURITIES CORPORATION

CHASE SECURITIES, INC.
, 1996

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 81

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 12. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES AND
ACT LIABILITIES

See Item 17 below.

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Set forth below are the estimated expenses to be incurred by the Company in
connection with the sale of the Common Stock (exclusive of underwriting
discounts):

<TABLE>
<S> <C>
SEC Registration Fee............................................... $51,725
NASD Filing Fee.................................................... 15,500
NYSE Listing Fee................................................... 95,100
Accounting Fees and Expenses....................................... *
Legal Fees and Expenses............................................ *
Blue Sky Fees and Expenses......................................... *
Transfer Agent's and Registrar's Fee............................... *
Printing and Engraving Expenses.................................... *
Miscellaneous Expenses............................................. *
-------
Total.................................................... $ *
=======
</TABLE>

- ------------------------------

* To be completed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Corporation Law") gives Delaware corporations broad powers to
indemnify their present and former directors and officers against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with threatened, pending or
completed actions, suits or proceedings to which they are parties or are
threatened to be made parties by reason of being or having been such directors
or officers, subject to specified conditions and exclusions; gives a director or
officer who successfully defends an action the right to be so indemnified; and
permits a corporation to buy directors' and officers' liability insurance. Such
indemnification is not exclusive of any other rights to which those indemnified
may be entitled under any by-law, agreement, vote of stockholders or otherwise.

As permitted by Section 145 of the Delaware Corporation Law, Article V of
the Amended and Restated Bylaws of the Company provides for the indemnification
by the Company of its directors, officers, employees and agents against
liabilities and expenses incurred in connection with actions, suits or proceeds
brought against them by a third party or in the right of the corporation, by
reason of the fact that they were or are such directors, officers, employees or
agents.

Article VII of the Company's Amended and Restated Certificate of
Incorporation provides that to the fullest extent permitted by the Delaware
Corporation Law as the same exists or may hereafter be amended, a director of
the Company shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director.

The Company has entered into, or intends to enter into, agreements to
indemnify its directors and executive officers in addition to the
indemnification provided for in the Restated Certificate of Incorporation and
Bylaws. These agreements, among other things, will indemnify the Company's
directors and executive officers for certain expenses (including attorneys'
fees) and all losses, claims, liabilities, judgments, fines and settlement
amounts incurred by such person arising out of or in connection with such
person's service as a director or officer of the Company to the fullest extent
permitted by applicable law.

II-1
<PAGE> 82

Policies of insurance may be obtained and maintained by the Company under
which its directors and officers will be insured, within the limits and subject
to the limitations of the policies, against certain expenses in connection with
the defense of, and certain liabilities which might be imposed as a result of,
actions, suits or proceedings to which they are parties by reason of being or
having been such directors or officers.

The form of Underwriting Agreement, filed as Exhibit 1.1 hereto, provides
for the indemnification of the Registrant, its controlling persons, its
directors and certain of its officers by the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act").

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since January 17, 1995 (the date of incorporation of the Registrant), the
Registrant has sold and issued the following securities which were not
registered under the Securities Act:

(a) Pursuant to a Stock Purchase Agreement dated as of March 22, 1995
among the Company, certain affiliates of The Yucaipa Companies and certain
other institutional investors, the Company issued an aggregate of 450,270
shares of Common Stock and an aggregate of 549,730 shares of Class B Common
Stock, in each case at a purchase price of $100 per share.

(b) On March 22, 1995, the Company issued an aggregate of 23,750
shares of Common Stock to certain management employees of the Company in
exchange for an aggregate of 3,100 restricted shares of common stock of
Dominick's Finer Foods, Inc.

(c) Between September 15, 1995 and February 22, 1996, the Company sold
an aggregate of 51,050 shares of Common Stock, at a purchase price of $100
per share, to a total of 26 employees of the Company pursuant to the terms
of the Dominick's Supermarkets, Inc. Management Equity Program.

(d) On May 4, 1995, the Company issued an aggregate of 26,470 shares
of Class B Common Stock to affiliates of BT Securities Corporation and
Chase Securities, Inc. as partial consideration for certain investment
banking services.

(e) On August 23, 1996, the Company sold an aggregate of 1,025 shares
of Common Stock, at a purchase price of $200 per share, to a total of 10
employees of the Company pursuant to the terms of the Dominick's
Supermarkets, Inc. Management Equity Program.

Any sale of securities described herein and under such captions in the
Prospectus were carried out in reliance on the exemptions from registration
contained in Section 4(2) of the Securities Act of 1933 as transactions not
involving any public offering, except that transactions involving the management
equity program were carried out in reliance upon Rule 701 of the Securities Act
of 1933. The recipients in each case represented their intention to acquire the
securities for investment only and not with a view of the distribution thereof.
All recipients had adequate access, through employment or other relationships,
to information about the Registrant.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS.

See Index to Exhibits.

(b) FINANCIAL STATEMENT SCHEDULES.

None.

II-2
<PAGE> 83

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Exchange Act of 1934, and is, therefore, unenforceable in the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Exchange Act of 1934 and will be governed by the final adjudication of such
issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or Rule 497(h) under the Securities Act shall be deemed to be a part of
this Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 84

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
Dominick's Supermarkets, Inc. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Northlake, State of Illinois, on October 4, 1996.

DOMINICK'S SUPERMARKETS, INC.

By: /s/ DARREN W. KARST

------------------------------------

Darren W. Karst

Executive Vice President, Finance
and

Administration, and Chief Financial
Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
* Chairman of the Board October 4, 1996
- -----------------------------------------------
Ronald W. Burkle
* President, Chief Executive October 4, 1996
- ----------------------------------------------- Officer, Director
Robert A. Mariano
/s/ Darren W. Karst Executive Vice President, October 4, 1996
- ----------------------------------------------- Finance and Administration,
Darren W. Karst Chief Financial Officer
(Principal Accounting
Officer), Secretary,
Director
* Director October 4, 1996
- -----------------------------------------------
Linda McLoughlin Figel
* Director October 4, 1996
- -----------------------------------------------
Patrick L. Graham
* Director October 4, 1996
- -----------------------------------------------
Mark A. Resnik
* Director October 4, 1996
- -----------------------------------------------
Peter P. Copses
* Director October 4, 1996
- -----------------------------------------------
David B. Kaplan
* Director October 4, 1996
- -----------------------------------------------
Antony P. Ressler
</TABLE>

*By: /s/ DARREN W. KARST

---------------------------------

Darren W. Karst

Attorney-in-Fact

II-4
<PAGE> 85

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ---------------------------------------------------------------------------------
<S> <C> <C>
*1.1 Form of Underwriting Agreement dated as of , 1996 among
the Company and Donaldson Lufkin & Jenrette Securities Corporation,
Morgan Stanley & Co. Incorporated, BT Securities Corporation and
Chase Securities, Inc. .............................................
*3.1 Form of Amended and Restated Certificate of Incorporation of the
Company.............................................................
*3.2 Form of Amended and Restated Bylaws of the Company..................
*4.1 Specimen Common Stock certificate...................................
*4.2 Warrant dated as of March 22, 1995 issued by the Company to The
Yucaipa Companies, as amended.......................................
*5.1 Opinion of Latham & Watkins regarding the validity of the Common
Stock, including consent............................................
*10.1 Form of Credit Agreement, dated as of , 1996, by and
among Dominick's Finer Foods, Inc. as Borrower, the Company as
Guarantor, the lenders listed therein, Bankers Trust Company and The
Chase Manhattan Bank, as Co-Arrangers, and Bankers Trust Company, as
Administrative Agent................................................
10.2 Stock Purchase Agreement dated as of January 17, 1995 by and among
DFF Holdings, Inc., DFF Sub, Inc., Dodi L.L.C., Dodi Family L.L.C.
and Dodi Developments L.L.C.........................................
10.3 Tax Matters Agreement, dated as of March 22, 1995, by and among the
Company, DFF Supermarkets, Inc., Dominick's Finer Foods, Inc., Dodi
L.L.C., Dodi Family L.L.C., Dodi Developments L.L.C., Dodi, Inc.,
Blackhawk Developments, Inc., Blackhawk Properties, Inc., Dominick's
Finer Foods, Inc. of Illinois, Dodi Hazelcrest, Inc., Kohl's of
Bloomingdale, Inc., Jerry's Deep Discount Centers, Inc. and Save-It
Discount Foods Corporation..........................................
10.4 Employment Agreement dated as of March 22, 1995 between Dominick's
Finer Foods, Inc. and Robert A. Mariano.............................
10.5 Employment Agreement dated as of March 22, 1995 between Dominick's
Finer Foods, Inc. and Robert E. McCoy...............................
10.6 Employment Agreement dated as of March 22, 1995 between Dominick's
Finer Foods, Inc. and Herbert R. Young..............................
*10.7 Form of Management Agreement among The Yucaipa Companies, the
Company and Dominick's Finer Foods, Inc. ...........................
*10.8 Stockholders Agreement, dated as of March 22, 1995, by and among the
Company, DFF Supermarkets, Inc., Dominick's Finer Foods, Inc., and
the stockholders of the Company named therein, as amended...........
*10.9 Registration Rights Agreement, dated as of March 22, 1995, by and
among the Company, DFF Supermarkets, Inc., Dominick's Finer Foods,
Inc., and the stockholders of the Company named therein.............
10.10 Dominick's Supermarkets, Inc. 1995 Stock Option Plan, as adopted
March 19, 1995......................................................
</TABLE>

E-1
<PAGE> 86

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ---------------------------------------------------------------------------------
<S> <C> <C>
10.11 Indenture, dated as of May 4, 1995, by and among Dominick's Finer
Foods, Inc., Dodi Hazelcrest, Inc., Dominick's Finer Foods, Inc. of
Illinois, Jerry's Deep Discount Centers, Inc., Kohl's of
Bloomingdale, Inc. and Save-It Discount Foods Corporation, as
Subsidiary Guarantors, and United States Trust Company of New York,
as Trustee, with respect to Dominick's 10 7/8% Senior Subordinated
Notes due 2005......................................................
*21.1 Subsidiaries of the Company.........................................
23.1 Consent of Ernst & Young LLP, independent auditors..................
*23.2 Consent of Latham & Watkins (included in the opinion filed as
Exhibit 5.1 to the Registration Statement)..........................
+24.1 Power of Attorney of the Company....................................
+27.1 Financial Data Schedule (32 weeks ended October 28, 1995)...........
+27.2 Financial Data Schedule (40 weeks ended August 3, 1996).............
</TABLE>

- ------------------------------

* To be filed by amendment.

+ Previously filed.

E-2

<PAGE> 1

Exhibit 10.2

STOCK PURCHASE AGREEMENT

BY AND AMONG

DFF HOLDINGS, INC.,

DFF ACQUISITION SUB, INC.,

DODI L.L.C.,

DODI FAMILY L.L.C.

AND

DODI DEVELOPMENTS L.L.C.

DATED JANUARY 17, 1995

RELATING TO THE SALE AND PURCHASE OF THE
OUTSTANDING CAPITAL STOCK OF

DODI, INC.
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Action . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Affiliate . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Agreement . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Asset Transfer Agreement . . . . . . . . . . . . . . . 3
1.5 Authorizations . . . . . . . . . . . . . . . . . . . . 3
1.6 Balance Sheet . . . . . . . . . . . . . . . . . . . . 3
1.7 Balance Sheet Date . . . . . . . . . . . . . . . . . . 3
1.8 Closing . . . . . . . . . . . . . . . . . . . . . . . 3
1.9 Closing Date . . . . . . . . . . . . . . . . . . . . . 3
1.10 Code . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.11 Contracts . . . . . . . . . . . . . . . . . . . . . . 3
1.12 Covered Liabilities . . . . . . . . . . . . . . . . . 3
1.13 Defects . . . . . . . . . . . . . . . . . . . . . . . 3
1.14 Dominick's Group . . . . . . . . . . . . . . . . . . . 4
1.15 Employee Pension Benefit Plan . . . . . . . . . . . . 4
1.16 Employee Welfare Benefit Plan . . . . . . . . . . . . 4
1.17 Environmental Laws . . . . . . . . . . . . . . . . . . 4
1.18 ERISA . . . . . . . . . . . . . . . . . . . . . . . . 4
1.19 Evaluation Material . . . . . . . . . . . . . . . . . 4
1.20 Excluded Affiliates' Property . . . . . . . . . . . . 5
1.21 Excluded Assets . . . . . . . . . . . . . . . . . . . 5
1.22 Excluded Dominick's Property . . . . . . . . . . . . . 5
1.23 Excluded Liabilities . . . . . . . . . . . . . . . . . 5
1.24 Excluded Subsidiaries . . . . . . . . . . . . . . . . 6
1.25 Excluded Properties Leases . . . . . . . . . . . . . . 6
1.26 Financial Statements . . . . . . . . . . . . . . . . . 6
1.27 Funded Indebtedness . . . . . . . . . . . . . . . . . 6
1.28 Goldman Letter Agreement . . . . . . . . . . . . . . . 6
1.29 Hazardous Materials . . . . . . . . . . . . . . . . . 6
1.30 HSR Act . . . . . . . . . . . . . . . . . . . . . . . 6
1.31 Interim Balance Sheet . . . . . . . . . . . . . . . . 7
1.32 Interim Balance Sheet Date . . . . . . . . . . . . . . 7
1.33 Interim Statements . . . . . . . . . . . . . . . . . . 7
1.34 Leased Real Property . . . . . . . . . . . . . . . . . 7
1.35 Leases . . . . . . . . . . . . . . . . . . . . . . . . 7
1.36 Liens . . . . . . . . . . . . . . . . . . . . . . . . 7
1.37 Multiemployer Plan . . . . . . . . . . . . . . . . . . 7
1.38 Other Transaction Documents . . . . . . . . . . . . . 7
</TABLE>

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<TABLE>
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1.39 Other Transaction Parties . . . . . . . . . . . . . . 8
1.40 Owned Real Property . . . . . . . . . . . . . . . . . 8
1.41 Permits . . . . . . . . . . . . . . . . . . . . . . . 8
1.42 Personnel . . . . . . . . . . . . . . . . . . . . . . 8
1.43 Plans . . . . . . . . . . . . . . . . . . . . . . . . 8
1.44 Real Property . . . . . . . . . . . . . . . . . . . . 8
1.45 Restructuring Transactions . . . . . . . . . . . . . . 8
1.46 Shares . . . . . . . . . . . . . . . . . . . . . . . . 8
1.47 Shareholder Property . . . . . . . . . . . . . . . . . 8
1.48 Shareholder Lease . . . . . . . . . . . . . . . . . . 8
1.49 Software . . . . . . . . . . . . . . . . . . . . . . . 8
1.50 Stock Encumbrances . . . . . . . . . . . . . . . . . . 9
1.51 Stock Redemption . . . . . . . . . . . . . . . . . . . 9
1.52 Subsidiaries . . . . . . . . . . . . . . . . . . . . . 9
1.53 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 9
1.54 Tax Matters Agreement . . . . . . . . . . . . . . . . 9
1.55 Tax Survival Period . . . . . . . . . . . . . . . . . 9
1.56 Third Party Leases . . . . . . . . . . . . . . . . . . 9
1.57 Third Party Real Property . . . . . . . . . . . . . . 10
1.58 Title Company . . . . . . . . . . . . . . . . . . . . 10
1.59 Transactions . . . . . . . . . . . . . . . . . . . . . 10

ARTICLE II - STOCK PURCHASE TRANSACTION . . . . . . . . . . . . . . . . 10

2.1 Agreement to Purchase and Sell Shares . . . . . . . . 10
2.2 Payment of Purchase Price . . . . . . . . . . . . . . 10
2.3 Post-Closing Contingent Payment . . . . . . . . . . . 10
2.4 Merger Transactions . . . . . . . . . . . . . . . . . 11
2.5 Closing . . . . . . . . . . . . . . . . . . . . . . . 11
2.6 Alternative Transaction . . . . . . . . . . . . . . . 11

ARTICLE III - WARRANTIES OF SHAREHOLDERS . . . . . . . . . . . . . . . 11

3.1 Authority . . . . . . . . . . . . . . . . . . . . . . 12
3.2 Organization and Qualification . . . . . . . . . . . . 12
3.3 Capital Structure of the Dominick's Group . . . . . . 13
3.4 Title to Shares and Stock of Dominick's and the
Subsidiaries . . . . . . . . . . . . . . . . . . . . . 13
3.5 Other Investments . . . . . . . . . . . . . . . . . . 13
3.6 Financial Statements . . . . . . . . . . . . . . . . . 14
3.7 Events Subsequent to the Balance Sheet Date . . . . . 14
3.8 Liabilities . . . . . . . . . . . . . . . . . . . . . 17
3.9 Accounts and Notes Receivable . . . . . . . . . . . . 17
3.10 Inventories . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>

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<TABLE>
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3.11 Real Property . . . . . . . . . . . . . . . . . . . . 17
3.12 Tangible Personal Property . . . . . . . . . . . . . . 20
3.13 Contracts . . . . . . . . . . . . . . . . . . . . . . 20
3.14 Intellectual Property . . . . . . . . . . . . . . . . 21
3.15 Compliance with Law . . . . . . . . . . . . . . . . . 22
3.16 Environmental Matters . . . . . . . . . . . . . . . . 22
3.17 Litigation . . . . . . . . . . . . . . . . . . . . . . 22
3.18 No Restrictions; Consents . . . . . . . . . . . . . . 23
3.19 Authorizations . . . . . . . . . . . . . . . . . . . . 23
3.20 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 23
3.21 Compensation . . . . . . . . . . . . . . . . . . . . . 25
3.22 Labor Relations . . . . . . . . . . . . . . . . . . . 25
3.23 ERISA and the Plans . . . . . . . . . . . . . . . . . 26
3.24 Insurance . . . . . . . . . . . . . . . . . . . . . . 27
3.25 Related Party Transactions . . . . . . . . . . . . . . 28
3.26 Bank Accounts . . . . . . . . . . . . . . . . . . . . 28
3.27 No Conflict or Violation . . . . . . . . . . . . . . . 28

ARTICLE IV - WARRANTIES OF PURCHASER AND HOLDINGS . . . . . . . . . . . 29

4.1 Authority . . . . . . . . . . . . . . . . . . . . . . 29
4.2 Organization, Standing and Corporate Authority . . . . 29
4.3 Holdings Preferred Stock . . . . . . . . . . . . . . . 29
4.4 Purchase for Investment . . . . . . . . . . . . . . . 29
4.5 No Restrictions; Consents . . . . . . . . . . . . . . 29
4.6 No Conflict or Violation . . . . . . . . . . . . . . . 30
4.7 Commitments . . . . . . . . . . . . . . . . . . . . . 30

ARTICLE V - COVENANTS OF SELLERS . . . . . . . . . . . . . . . . . . . 30

5.1 Conduct of Business . . . . . . . . . . . . . . . . . 30
5.2 Access Pending Closing . . . . . . . . . . . . . . . . 32
5.3 Further Assurances and Cooperation . . . . . . . . . . 32
5.4 Surveys; Title Insurance . . . . . . . . . . . . . . . 32
5.5 Restructuring Transactions . . . . . . . . . . . . . . 34
5.6 Excluded Properties Leases . . . . . . . . . . . . . . 34
5.7 Alternative Proposals . . . . . . . . . . . . . . . . 34
5.8 Financial Information . . . . . . . . . . . . . . . . 34
5.9 Environmental Reports . . . . . . . . . . . . . . . . 34
5.10 Stock Redemption . . . . . . . . . . . . . . . . . . . 35
5.11 Stock Disposition . . . . . . . . . . . . . . . . . . 36
5.12 Closing . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>

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ARTICLE VI - COVENANTS OF PURCHASER . . . . . . . . . . . . . . . . . . 36

6.1 Books and Records . . . . . . . . . . . . . . . . . . 36
6.2 Confidentiality . . . . . . . . . . . . . . . . . . . 36
6.3 Excluded Properties Leases . . . . . . . . . . . . . . 37
6.4 Definitive Financing Agreements . . . . . . . . . . . 37
6.5 Closing . . . . . . . . . . . . . . . . . . . . . . . 37

ARTICLE VII - HSR ACT COMPLIANCE . . . . . . . . . . . . . . . . . . . 37

ARTICLE VIII - CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE . . . . . 38

8.1 Warranties . . . . . . . . . . . . . . . . . . . . . . 38
8.2 Performance . . . . . . . . . . . . . . . . . . . . . 38
8.3 Shares . . . . . . . . . . . . . . . . . . . . . . . . 38
8.4 Corporate Books . . . . . . . . . . . . . . . . . . . 38
8.5 Proof of Good Standing . . . . . . . . . . . . . . . . 38
8.6 Certificate of Sellers . . . . . . . . . . . . . . . . 38
8.7 Opinion of Counsel . . . . . . . . . . . . . . . . . . 39
8.8 Title Assurances . . . . . . . . . . . . . . . . . . . 39
8.9 Restructuring Transactions . . . . . . . . . . . . . . 39
8.10 Excluded Properties Leases . . . . . . . . . . . . . . 39
8.11 Stock Redemption . . . . . . . . . . . . . . . . . . . 39
8.12 Financing . . . . . . . . . . . . . . . . . . . . . . 39
8.13 HSR Act . . . . . . . . . . . . . . . . . . . . . . . 39
8.14 Regulatory Consents, Authorizations, etc. . . . . . . 39
8.15 Injunctions . . . . . . . . . . . . . . . . . . . . . 40
8.16 Environmental Reports . . . . . . . . . . . . . . . . 40
8.17 Funded Indebtedness . . . . . . . . . . . . . . . . . 40
8.18 Stock Exchange Transactions . . . . . . . . . . . . . 40
8.19 Further Assurances . . . . . . . . . . . . . . . . . . 40

ARTICLE IX - CONDITIONS TO OBLIGATION OF SELLERS TO CLOSE . . . . . . . 40

9.1 Warranties . . . . . . . . . . . . . . . . . . . . . . 41
9.2 Performance . . . . . . . . . . . . . . . . . . . . . 41
9.3 Certificate of Officer . . . . . . . . . . . . . . . . 41
9.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . 41
9.5 Purchase Price . . . . . . . . . . . . . . . . . . . . 41
9.6 Restructuring Transactions . . . . . . . . . . . . . . 41
9.7 Excluded Properties Leases . . . . . . . . . . . . . . 41
9.8 Stock Redemption . . . . . . . . . . . . . . . . . . . 41
9.9 HSR Act . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>

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9.10 Regulation Consents, Authorizations, etc. . . . . . . 41
9.11 Injunctions . . . . . . . . . . . . . . . . . . . . . 42
9.12 Further Assurances . . . . . . . . . . . . . . . . . . 42

ARTICLE X - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . 42

10.1 Termination Rights . . . . . . . . . . . . . . . . . . 42
10.2 Effect of Termination . . . . . . . . . . . . . . . . 43

ARTICLE XI - SURVIVAL AND INDEMNIFICATION . . . . . . . . . . . . . . . 43

11.1 Survival . . . . . . . . . . . . . . . . . . . . . . . 43
11.2 Indemnification by Shareholders . . . . . . . . . . . 43
11.3 Indemnification by Purchaser . . . . . . . . . . . . . 44
11.4 Indemnification Procedures . . . . . . . . . . . . . . 44
11.5 No Right of Contribution . . . . . . . . . . . . . . . 45
11.6 Nature of Payments . . . . . . . . . . . . . . . . . . 45
11.7 Limitations on Indemnification Obligations . . . . . . 45
11.8 Payment of Indemnification Obligations and Right of
Offset . . . . . . . . . . . . . . . . . . . . . . . . 45

ARTICLE XII - SHAREHOLDERS' RESPONSIBILITY; POST CLOSING
DISTRIBUTIONS BY SHAREHOLDERS . . . . . . . . . . 46

12.1 Joint and Several . . . . . . . . . . . . . . . . . . 46
12.2 Net Worth Covenant . . . . . . . . . . . . . . . . . . 46
12.3 Distributions . . . . . . . . . . . . . . . . . . . . 46

ARTICLE XIII - POST CLOSING COVENANTS . . . . . . . . . . . . . . . . . 48

13.1 Tax Matters Agreement . . . . . . . . . . . . . . . . 48
13.2 Company Name Change . . . . . . . . . . . . . . . . . 48
13.3 Covenant Not to Compete . . . . . . . . . . . . . . . 48

ARTICLE XIV - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 49

14.1 Entire Agreement . . . . . . . . . . . . . . . . . . . 49
14.2 Severability . . . . . . . . . . . . . . . . . . . . . 49
14.3 Notices . . . . . . . . . . . . . . . . . . . . . . . 49
14.4 Counterparts . . . . . . . . . . . . . . . . . . . . . 50
14.5 Governing Law and Venue . . . . . . . . . . . . . . . 50
14.6 Successors and Assigns . . . . . . . . . . . . . . . . 51
14.7 Further Assurances . . . . . . . . . . . . . . . . . . 51
14.8 Gender, Number and Headings . . . . . . . . . . . . . 51
</TABLE>

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14.9 Schedules . . . . . . . . . . . . . . . . . . . . . . . . 51
14.10 Waiver of Provisions . . . . . . . . . . . . . . . . . . 51
14.11 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 51
14.12 Recitals . . . . . . . . . . . . . . . . . . . . . . . . 51
14.13 Knowledge of Sellers . . . . . . . . . . . . . . . . . . 51
14.14 No Third Party Beneficiaries . . . . . . . . . . . . . . 52
14.15 Broker Fees . . . . . . . . . . . . . . . . . . . . . . . 52
14.16 Public Announcements . . . . . . . . . . . . . . . . . . 52

Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>

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<TABLE>
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EXHIBITS

1.4 Asset Transfer Agreement
1.25 Excluded Properties leases
1.54 Tax Matters Agreement
8.7 Opinion of Counsel Sellers and the Dominick's Group
9.4 Opinion of Counsel to Purchaser

SCHEDULES

3.2(b) Organization and Qualification
3.3 Subsidiary Capitalization
3.5 Other Investments
3.6(a) Financial Statements
3.7 Events Subsequent to the Balance Sheet Date
3.8 Liabilities
3.11(a) Owned Real Property
3.11(b) Leased Real Property
3.11(c) Third Party Real Property
3.11(d) Condition of Real Property; Compliance
3.11(f) Real Property Transactions
3.12 Tangible Personal Property
3.13 Contracts
3.14(a) Intellectual Property Registrations
3.14(b) Other Intellectual Property
3.14(c) License Agreements
3.14(d) Intellectual Property Matters
3.15 Compliance with Law
3.16 Environmental Matters
3.17 Litigation
3.18 No Restrictions; Consents
3.19 Authorizations
3.20 Taxes
3.21 Compensation
3.22 Labor Relations
3.23 ERISA and the Plans
3.24 Insurance
3.25 Related Party Transactions
3.26 Bank Accounts
3.27 No Conflict or Violation
</TABLE>

vii
<PAGE> 9
STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT is made and entered into as of
this 17th day of January 1995 by and among DFF Holdings, Inc., a Delaware
corporation ("HOLDINGS"), DFF Acquisition Sub, Inc., a Delaware corporation
("PURCHASER"), and Dodi L.L.C., a limited liability company organized under the
laws of the State of Illinois ("DODI"), Dodi Family L.L.C., a limited liability
company organized under the laws of the State of Illinois ("DFLLC"), and Dodi
Developments L.L.C., a limited liability company organized under the laws of
the State of Illinois ("DDLLC").

INTRODUCTION

Dodi, DFLLC (together, the "SELLERS") and DDLLC (together with
the Sellers, the "SHAREHOLDERS"), collectively own 100% of the issued and
outstanding capital stock of Dodi, Inc., a Delaware corporation (the
"COMPANY"), consisting of Series A Non-Cumulative Voting Preferred Stock, $.01
par value per share ("PREFERRED STOCK"), and Common Stock, $.01 par value per
share ("COMMON STOCK"). The Company currently owns (a) approximately 96.7% of
the issued and outstanding capital stock (the "DOMINICK'S CAPITAL STOCK") of
Dominick's Finer Foods, Inc., a Delaware corporation ("DOMINICK'S"), and (b)
100% of the issued and outstanding capital stock of Dodi Developments, Inc.
("DDI") and Dodi Properties, Inc. ("DPI"). The Company, through Dominick's and
the directly and indirectly wholly-owned subsidiaries of Dominick's, operates
two chains of retail food stores in the greater Chicago, Illinois area.

Concurrently herewith, Dodi and Holdings have entered into a
separate Stock Exchange Agreement (the "STOCK EXCHANGE AGREEMENT") pursuant to
which, immediately prior to the Stock Purchase Transaction (as defined below),
Dodi shall contribute 4,156 of the shares of the Common Stock held by it to
Holdings in exchange for shares of Holdings 15% Redeemable Exchangeable
Cumulative Preferred Stock, Series A (the "HOLDINGS PREFERRED STOCK"), having
an initial liquidation preference of $40 million, and having the other terms
and conditions set forth in the certificate of designation included as Annex A
to the Stock Exchange Agreement (the "STOCK EXCHANGE TRANSACTIONS"). The
Holdings Preferred Stock will be entitled to the benefit of certain
registration rights as provided in the form of registration rights agreement
included as Annex B to the Stock Exchange Agreement (the "REGISTRATION RIGHTS
AGREEMENT"). Contemporaneously with the Stock Exchange Transactions, certain
affiliates of The Yucaipa Companies and certain other institutional investors
(the "NEW EQUITY INVESTORS") will contribute approximately $100 million in cash
to Holdings in exchange for shares of its common stock (the "HOLDINGS COMMON
STOCK") such that immediately after the contributions by Dodi and the New
Equity Investors, the New Equity Investors will own, in the aggregate, more
than 80% of the Holdings Common Stock and Dodi will own 100% of the Holdings
Preferred Stock.

Sellers desire to sell to Purchaser and Purchaser desires to
purchase from Sellers, all of the Preferred Stock and all of the Common Stock
(after giving effect to the Stock
<PAGE> 10
Exchange Transactions) Sellers hold, on the terms and subject to the conditions
set forth in this Agreement (the "STOCK PURCHASE TRANSACTION").

At least one business day before the consummation of the Stock
Purchase Transaction, the Company will, or, as the case may be, will cause
Dominick's to distribute to DDLLC, in exchange for the surrender of all of the
Common Stock held by DDLLC, (a) substantially all of the assets of DDI and DPI,
subject to all of the liabilities of DDI and DPI, and (b) Dominick's ownership
interest in certain parcels of real property.

At least one business day before the consummation of the Stock
Purchase Transaction and immediately after the transactions described in the
preceding paragraph, the Company intends to sell all of the issued and
outstanding capital stock of DDI and DPI.

In addition, at least one business day before the consummation
of the Stock Purchase Transaction, the Company will cause Dominick's to acquire
the Dominick's Capital Stock not currently owned by the Company. After giving
effect to the foregoing transactions, the Company will own (a) directly 100% of
the Dominick's Capital Stock, and (b) indirectly 100% of the issued and
outstanding capital stock of Dominick's directly and indirectly wholly-owned
subsidiaries.

Immediately after the transactions described in the preceding
paragraphs, (a) Purchaser will merge with and into the Company, with the
Company being the surviving corporation, and (b) DFF Acquisition Sub Two, Inc.,
a Delaware corporation ("PURCHASER SUB") and a wholly-owned subsidiary of
Purchaser, will merge with and into Dominick's, with Dominick's being the
surviving corporation (the "MERGER TRANSACTIONS").

IT IS, THEREFORE, AGREED:

ARTICLE I

DEFINITIONS

In addition to the terms defined above and the other terms
defined in the body of this Agreement, the following terms shall have the
meanings set forth in this Article I for purposes of this Agreement:

1.1 ACTION. The term "ACTION" shall have the meaning set
forth in Section 3.17.

1.2 AFFILIATE. The term "AFFILIATE" shall mean, with
respect to any party, any individual, corporation, partnership, limited
liability company or other entity that directly, or through one or more
intermediaries, controls or is controlled by or is under common control with,
such party.

1.3 AGREEMENT. The term "AGREEMENT" shall mean this
Stock Purchase Agreement.

2
<PAGE> 11
1.4 ASSET TRANSFER AGREEMENT. The term "ASSET TRANSFER
AGREEMENT" shall mean the Asset Transfer Agreement in the form of Exhibit 1.4
hereto, to be entered into at least one business day before the consummation of
the Stock Purchase Transaction.

1.5 AUTHORIZATIONS. The term "AUTHORIZATIONS" shall have
the meaning set forth in Section 3.19.

1.6 BALANCE SHEET. The term "BALANCE SHEET" shall mean
Dominick's consolidated balance sheet at October 29, 1994.

1.7 BALANCE SHEET DATE. The term "BALANCE SHEET DATE"
shall mean October 29, 1994.

1.8 CLOSING. The term "CLOSING" shall mean the
consummation of the Stock Purchase Transaction.

1.9 CLOSING DATE. The term "CLOSING DATE" shall mean the
date on which the Closing occurs, which date shall be 60 days after the date
hereof, or such earlier or later date as of which all of the conditions to
Closing shall have been fulfilled or waived, or such other date upon which
Purchaser and Sellers may hereafter mutually agree in writing.

1.10 CODE. The term "CODE" shall mean the Internal
Revenue Code of 1986, as amended.

1.11 CONTRACTS. The term "CONTRACTS" shall have the
meaning set forth in Section 3.13.

1.12 COVERED LIABILITIES. The term "COVERED LIABILITIES"
shall mean any and all debts, losses, claims, damages, costs, demands, fines,
judgments, contracts (implied and expressed, written and unwritten), penalties,
obligations, payments, liabilities of every type and nature actually incurred
(including without limitation, those arising out of any Action), together with
any reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees and out-of-pocket expenses) incurred in connection with any of
the foregoing (including, without limitation, reasonable costs and expenses
incurred in investigating, preparing or defending any Action).

1.13 DEFECTS. With respect to any parcel of Owned Real
Property, the term "DEFECTS" shall mean Liens, claims, exceptions, conditions
or matters affecting such parcel, other than: (a) the liens, claims,
exceptions, conditions, or matters described on SCHEDULE 3.11(A); (b) the Third
Party Leases; (c) real estate taxes and assessments not yet due and payable;
(d) roads and highways, spurs and switch tracks and rights of way of any
railroad serving or crossing the Owned Real Property, municipal and zoning
ordinances, easements, rights of way, covenants, conditions and restrictions of
record and encroachments that do not materially interfere with the conduct of
retail operations (or, if not a store, other operations) currently conducted by
the Dominick's Group or materially detract from the value of said parcel;

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and (e) unrecorded easements for any utilities providing utility service to the
Owned Real Property.

1.14 DOMINICK'S GROUP. The term "DOMINICK'S GROUP" shall
mean the Company, Dominick's and the Subsidiaries, taken as a whole.

1.15 EMPLOYEE PENSION BENEFIT PLAN. The term "EMPLOYEE
PENSION BENEFIT PLAN" shall mean a plan as defined in Section 3(2) of ERISA,
but not including any Multi-Employer Plan.

1.16 EMPLOYEE WELFARE BENEFIT PLAN. The term "EMPLOYEE
WELFARE BENEFIT PLAN" shall mean a plan as defined in Section 3(1) of ERISA,
but not including any Multi-Employer Plan.

1.17 ENVIRONMENTAL LAWS. The term "ENVIRONMENTAL LAWS"
shall mean any federal, state or local law, statute, ordinance, order, decree,
rule or regulation relating to releases, discharges, emissions or disposals to
air, water, land or groundwater, to the withdrawal or use of groundwater, to
the use, handling or disposal of polychlorinated biphenyls, asbestos or urea
formaldehyde, to the treatment, storage, disposal or management of Hazardous
Materials, to exposure to toxic, hazardous or other controlled, prohibited or
regulated substances, and to the transportation, release or any other use of
Hazardous Materials, including the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601, et seq. ("CERCLA"),
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq.
("RCRA"), the Toxic Substances Control Act, 15 U.S.C. Section 2601, et seq.
("TSCA"), the Occupational, Safety and Health Act, 29 U.S.C. Section 651, et
seq., the Clean Air Act, 42 U.S.C. Section 7401, et seq., the Federal Water
Pollution Control Act, 33 U.S.C. Section 1251, et seq., the Safe Drinking
Water Act, 42 U.S.C. Section 300f et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1802 et seq., ("HMTA") and the
Emergency Planning and Community Right to Know Act, 42 U.S.C. 11001 et seq.
("EPCRA"), and other comparable state laws and all rules, regulations and
guidance documents promulgated pursuant thereto or published thereunder.

1.18 ERISA. The term "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.

1.19 EVALUATION MATERIAL. The term "EVALUATION MATERIAL"
shall mean (a) information obtained from reviewing the books and records of any
member of the Dominick's Group or DDI or DPI, (b) information obtained from
reviewing the assets and properties of the Dominick's Group or DDI or DPI, (c)
any other information furnished to either Holdings, Purchaser or their
directors, officers, partners, employees, agents, representatives or advisors
(whether orally, in writing or in any other form) by any of the Shareholders or
any member of the Dominick's Group or DDI or DPI, their representatives,
employees, agents or advisors, and (d) all notes, analyses, computations,
studies or other documents possessed by either Holdings, Purchaser or their
directors, officers, partners, employees, representatives or advisors, whether
prepared by Holdings, Purchaser or others, which contain material amounts of
any such information. Notwithstanding the foregoing, the term "Evaluation
Material" does not include information which (a) is already in Holdings' or
Purchaser's possession, provided that such

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information is not known by Holdings or Purchaser to be subject to a
confidentiality agreement with or other obligation of secrecy to any of the
Shareholders or any member of the Dominick's Group, (b) becomes generally
available to the public other than as a result of a disclosure by Holdings or
Purchaser or their directors, officers, partners, employees, agents or
advisors, or (c) becomes available to Holdings or Purchaser on a
non-confidential basis from a source other than any of the Shareholders or a
member of the Dominick's Group or their advisors, provided that such source is
not known by Holdings or Purchaser to be bound by a confidentiality agreement
with or other obligation of secrecy to any of the Shareholders or a member of
the Dominick's Group.

1.20 EXCLUDED AFFILIATES' PROPERTY. The term "EXCLUDED
AFFILIATES' PROPERTY" shall mean the real estate and other properties defined
in the Asset Transfer Agreement as the DDI Property and the DPI Property.

1.21 EXCLUDED ASSETS. The term "EXCLUDED ASSETS" shall
mean (a) the Excluded Affiliates' Property, the Excluded Dominick's Property,
and all other properties and assets transferred to DDLLC pursuant to the Asset
Transfer Agreement, and (b) the capital stock of the Excluded Subsidiaries.

1.22 EXCLUDED DOMINICK'S PROPERTY. The term "EXCLUDED
DOMINICK'S PROPERTY" shall mean the real estate and other properties defined in
the Asset Transfer Agreement as the Dominick's Property.

1.23 EXCLUDED LIABILITIES. The term "EXCLUDED
LIABILITIES" shall mean, collectively, all Covered Liabilities attributable to
or arising from (a) the Excluded Assets individually or taken as a whole,
except to the extent allocated to Purchaser, the Dominick's Group or any of
their Affiliates under the Tax Matters Agreement or allocated to Dominick's
under the Asset Transfer Agreement, (b) the Excluded Subsidiaries or the
business conducted by either of them prior to or following the Closing Date
except to the extent allocated to Purchaser, the Dominick's Group, or any of
their Affiliates under the Tax Matters Agreement or allocated to Dominick's
under the Asset Transfer Agreement, (c) the transfer of the Excluded Assets and
the Excluded Subsidiaries pursuant to the Asset Transfer Agreement except to
the extent allocated to Purchaser, the Dominick's Group, or any of their
Affiliates under the Tax Matters Agreement or allocated to Dominick's under the
Asset Transfer Agreement, (d) all other liabilities assumed by the Shareholders
under the Asset Transfer Agreement, and (e) all liabilities of the Company on
the Closing Date (other than those referenced in Section 3.6(b)(iii) hereof to
the extent allocated to Purchaser, any member of the Dominick's Group or any of
their Affiliates under the Tax Matters Agreement), and (f) any liabilities of
the Dominick's Group to the minority shareholders of Dominick's or the holders
of the stock appreciation rights relating to the Dominick's capital stock in
respect of such rights or stock, which, in either case, are outstanding
immediately prior to the consummation of the Stock Redemption (other than the
obligation of Dominick's to effect the transactions contemplated by Section
5.10 hereof and other than such liabilities and obligations as Holdings,
Purchaser, or any member of the Dominick's Group or any of their Affiliates may
have as a result of or in connection with its issuance to any such holder of
any stock appreciation rights, options, stock, or other security in exchange
for all or any portion of such holders' stock appreciation rights or stock),
and including liabilities

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which the Dominick's Group may incur with respect to any obligation it may have
to indemnify or reimburse any employee with respect to, or for, any excise tax
under Section 4999 of the Code under the employment contracts specified in part
2(f) of SCHEDULE 3.21 (but not any amendments thereto after the Closing Date).

1.24 EXCLUDED SUBSIDIARIES. The term "EXCLUDED
SUBSIDIARIES" means DDI and DPI.

1.25 EXCLUDED PROPERTIES LEASES. The term "EXCLUDED
PROPERTIES LEASES" shall mean the Real Estate Leases, each in the form set
forth in Exhibit 1.25 hereto, to be entered into contemporaneously with the
consummation of the Restructuring Transactions, by and between DDLLC and
Dominick's in respect of the Excluded Dominick's Property.

1.26 FINANCIAL STATEMENTS. The term "FINANCIAL
STATEMENTS" shall mean (a) the Interim Statements, and (b) Dominick's audited
consolidated financial statements, including consolidated balance sheet,
consolidated statement of income, consolidated statement of changes in
stockholders' equity, consolidated statement of cash flows, and all notes
thereto, for the fiscal years ended November 2, 1991, October 31, 1992, October
30, 1993, and October 29, 1994, all examined and reported on by Ernst & Young,
independent certified public accountants.

1.27 FUNDED INDEBTEDNESS. The term "FUNDED INDEBTEDNESS"
shall mean the sum of (a) the amount of all long-term debt (including capital
lease obligations) of the Dominick's Group, plus (b) the amount of the current
portion of the long-term debt (including capital lease obligations) of the
Dominick's Group, plus (c) the amount of any other current liabilities of the
Dominick's Group which represent indebtedness for borrowed money or other
interest bearing obligations.

1.28 GOLDMAN LETTER AGREEMENT. The term "GOLDMAN LETTER
AGREEMENT" shall mean the letter agreement between Dominick's and Goldman,
Sachs & Co. listed in part 1(h)(i) of Schedule 3.13.

1.29 HAZARDOUS MATERIALS. The term "HAZARDOUS MATERIALS"
shall mean each and every element, compound, chemical mixture, contaminant,
pollutant, material, waste or other substance which is defined, determined or
identified as hazardous or toxic under Environmental Laws or the release of
which is regulated under Environmental Laws. Without limiting the generality
of the foregoing, the term includes: "hazardous substances" as defined in
CERCLA; "extremely hazardous substances" as defined in EPCRA; "hazardous waste"
as defined in RCRA; "hazardous materials" as defined in HMTA; "chemical
substance or mixture" as defined in TSCA; crude oil, petroleum products or any
fraction thereof; radioactive materials including source, byproduct or special
nuclear materials; asbestos or asbestos-containing materials; and radon.

1.30 HSR ACT. The term "HSR ACT" shall mean the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

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1.31 INTERIM BALANCE SHEET. The term "INTERIM BALANCE
SHEET" shall mean Dominick's unaudited consolidated balance sheet as of
November 26, 1994.

1.32 INTERIM BALANCE SHEET DATE. The term "INTERIM
BALANCE SHEET DATE" shall mean November 26, 1994.

1.33 INTERIM STATEMENTS. The term "INTERIM STATEMENTS"
shall mean Dominick's unaudited consolidated financial statements, including
consolidated balance sheet, consolidated statement of earnings and retained
earnings and consolidated statement of changes in financial position, for the
four week periods ended November 27, 1993 and November 26, 1994.

1.34 LEASED REAL PROPERTY. The term "LEASED REAL
PROPERTY" shall mean all real property leased or subleased by any member of the
Dominick's Group and all easements and other rights appurtenant thereto,
including the Excluded Dominick's Property.

1.35 LEASES. The term "LEASES" shall mean the agreements
pursuant to which a member of the Dominick's Group holds a possessory interest
in any of the Leased Real Property, and all amendments thereto and renewals or
extensions thereof.

1.36 LIENS. The term "LIENS" shall mean all liens,
claims, security interests, options, leases, restrictions, mortgages, pledges,
conditional sale or other title retention agreements or other encumbrances
affecting any member of the Dominick's Group or any of their respective
properties or assets, other than: (a) encumbrances for taxes or governmental
charges or assessments or claims, the payment of which is not yet due or which
are being contested in good faith by appropriate proceedings; (b) statutory
encumbrances of landlords, carriers, warehousers, mechanics, materialmen and
other similar persons arising in the ordinary course of business for sums not
yet delinquent or being contested in good faith; (c) encumbrances relating to
security, escrow or other deposits made in the ordinary course of business; (d)
the interests of lessors in properties used or held by the Dominick's Group
under leases; (e) roads and highways, spurs and switch tracks and rights of way
of any railroad serving or crossing the Real Property, municipal and zoning
ordinances, and easements, rights of way, covenants, conditions, and
restrictions of record and encroachments that do not materially interfere with
the conduct of retail operations (or, if not a store, other operations)
currently conducted by the Dominick's Group on any parcel of the Real Property
or materially detract from the value of such parcel; and (f) unrecorded
easements for any utilities providing utility service to the Real Property,
provided that to the extent any such encumbrance described in the preceding
clauses (a) through (f) secures payment of a liability of the Dominick's Group,
such liability is accrued on the books and records of the Dominick's Group.

1.37 MULTIEMPLOYER PLAN. The term "MULTIEMPLOYER PLAN"
shall mean a plan as defined in Section 4001(a)(3) of ERISA.

1.38 OTHER TRANSACTION DOCUMENTS. The term "OTHER
TRANSACTION DOCUMENTS" shall mean the Asset Transfer Agreement and the
appendices thereto, the Tax

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Matters Agreement, the Excluded Properties Leases, the Stock Exchange
Agreement, the Registration Rights Agreement and any other documents
contemplated thereby.

1.39 OTHER TRANSACTION PARTIES. The term "OTHER
TRANSACTION PARTIES" shall mean each person, other than Holdings, Purchaser,
Purchaser Sub and the Shareholders, that is a signatory to any of the Other
Transaction Documents.

1.40 OWNED REAL PROPERTY. The term "OWNED REAL PROPERTY"
shall mean all of the real property owned by the Dominick's Group or any member
thereof (or, as the case may be, owned by a land trust of which any member of
the Dominick's Group is the sole beneficiary), other than the Excluded
Dominick's Property, and all easements and other rights appurtenant thereto.

1.41 PERMITS. The term "PERMITS" shall mean the permits,
inspections, licenses and other authorizations required under Environmental
Laws.

1.42 PERSONNEL. The term "PERSONNEL" shall have the
meaning set forth in Section 3.7(d).

1.43 PLANS. The term "PLANS" shall mean any Employee
Pension Benefit Plan or any Employee Welfare Benefit Plan.

1.44 REAL PROPERTY. The term "REAL PROPERTY" shall mean
all of the Leased Real Property, Owned Real Property and Third Party Real
Property.

1.45 RESTRUCTURING TRANSACTIONS. The term "RESTRUCTURING
TRANSACTIONS" shall mean the distribution to the Company and the assignment,
conveyance and distribution or sale by the Company, to DDLLC or a transferee or
transferees designated by DDLLC, of the Excluded Assets, all in accordance with
the Asset Transfer Agreement.

1.46 SHARES. The term "SHARES" shall mean all of the
issued and outstanding shares of Preferred Stock and Common Stock of the
Company held by the Shareholders, together with all rights incident thereto.

1.47 SHAREHOLDER PROPERTY. The term "SHAREHOLDER
PROPERTY" shall mean any of the Leased Real Property which, after giving effect
to the Stock Purchase Transaction and Restructuring Transactions, is directly
or indirectly owned by any Shareholder (or Affiliate thereof) or any other real
property directly or indirectly owned by any Shareholder (or Affiliate thereof)
that is hereafter leased to any member of the Dominick's Group.

1.48 SHAREHOLDER LEASE. The term "SHAREHOLDER LEASE"
shall mean the agreement pursuant to which a member of the Dominick's Group
holds a possessory interest in any of the Shareholder Property.

1.49 SOFTWARE. The term "SOFTWARE" shall mean all of the
computer software owned or used by the Dominick's Group in the conduct of its
business.

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1.50 STOCK ENCUMBRANCES. The term "STOCK ENCUMBRANCES"
shall mean all Liens, ownership claims, pledges, security interests, options,
redemption agreements, restrictions on voting rights or other incidents of
ownership, prior assignments, other restrictions, liabilities, obligations,
charges, encumbrances and claims other than restrictions on transfer imposed
under applicable federal and state securities laws.

1.51 STOCK REDEMPTION. The term "STOCK REDEMPTION" shall
mean the purchase by Dominick's of the 8,600 shares of Dominick's Capital Stock
not owned by the Company as of the date hereof, and the discharge and
satisfaction by Dominick's of all rights of the holders of stock appreciation
rights relating to Dominick's Capital Stock, all in accordance with the
requirements of Section 5.10.

1.52 SUBSIDIARIES. The term "SUBSIDIARIES" shall mean
Dominick's Finer Foods, Inc. of Illinois, Dodi Hazelcrest, Inc., Kohl's of
Bloomingdale, Inc., Jerry's Deep Discount Centers, Inc., and Save-It Discount
Foods Corporation.

1.53 TAXES. The term "TAXES" shall mean all federal,
state, local, foreign and other taxes, levies, imposts, assessments,
impositions or other similar government charges, including, without limitation,
income, estimated income, business, occupation, franchise, real property,
payroll, personal property, sales, transfer, stamp, use, employment, commercial
rent or withholding, occupancy, premium, gross receipts, profits, windfall
profits, deemed profits, license, lease, severance, capital, production,
corporation, ad valorem, excise, duty or other taxes, including interest,
penalties and additions thereto.

1.54 TAX MATTERS AGREEMENT. The term "TAX MATTERS
AGREEMENT" shall mean the Tax Matters Agreement in the form of EXHIBIT 1.54
hereto, to be entered into contemporaneously with the consummation of the Stock
Purchase Transaction.

1.55 TAX SURVIVAL PERIOD. The term "TAX SURVIVAL PERIOD"
shall mean the period from the Closing Date until the date which is one month
following the latest of (a) the date upon which liability to which any claim
regarding Taxes pursuant to this Agreement and the Tax Matters Agreement may
relate is barred by all applicable statutes of limitations (after taking into
account any extensions thereto made in accordance with the Tax Matters
Agreement), (b) the date upon which any claim for refund or credit related to
any such claim is barred by all applicable statutes of limitations (after
taking into account any extension thereto made in accordance with the Tax
Matters Agreement), and (c) with respect to any Covered Liabilities arising
from Taxes for which indemnity is being sought under Article XI hereof at the
expiration of the periods described in the preceding clauses (a) and (b), the
date of a final determination in such proceeding with respect to such
indemnification claim.

1.56 THIRD PARTY LEASES. The term "THIRD PARTY LEASES"
shall mean the leases or other agreements for Third Party Real Property as
listed on SCHEDULE 3.11(C), and all amendments thereto and renewals or
extensions thereof.

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1.57 THIRD PARTY REAL PROPERTY. The term "THIRD PARTY
REAL PROPERTY" shall mean those portions of the Owned Real Property and Leased
Real Property that are leased or licensed, subleased or sublicensed,
respectively, by the Dominick's Group to a third party.

1.58 TITLE COMPANY. The term "TITLE COMPANY" shall mean
Lawyers Title Insurance Corporation or such other title insurance company as is
selected by Sellers and is reasonably acceptable to Purchaser.

1.59 TRANSACTIONS. The term "TRANSACTIONS" shall mean the
Stock Purchase Transaction and the transactions provided for under the Other
Transaction Documents.

ARTICLE II

STOCK PURCHASE TRANSACTION

2.1 AGREEMENT TO PURCHASE AND SELL SHARES. Subject to
the terms and conditions set forth in this Agreement, on the Closing Date DFLLC
shall sell the Preferred Stock and Dodi shall sell 35,843 shares of the Common
Stock, respectively, to Purchaser, and Purchaser shall purchase the Preferred
Stock and Common Stock from DFLLC and Dodi, respectively, free and clear of any
Stock Encumbrances.

2.2 PAYMENT OF PURCHASE PRICE. Subject to the terms and
conditions set forth in this Agreement, on the Closing Date Purchaser shall pay
$344,865,000 to Sellers, of which (a) an amount equal to $6,600,000 shall be
paid to DFLLC in consideration for its sale of the Preferred Stock to
Purchaser, and (b) an amount equal to $338,265,000 shall be paid to Dodi in
consideration for its sale of 35,843 shares of the Common Stock to Purchaser.
Purchaser shall make such payments by bank wire transfer of immediately
available funds to the accounts designated in writing by DFLLC and Dodi,
respectively.

2.3 POST-CLOSING CONTINGENT PAYMENT.

(a) On the first business day after the Closing Date,
Holdings shall cause the Dominick's Group to pay to Dodi an amount
equal to the Company's cash balances determined immediately prior to
the Closing. Holdings shall cause the Dominick's Group to make such
payment by bank wire transfer of immediately available funds to the
account designated in writing by Dodi.

(b) As soon as practicable following the Closing Date,
and in no event more than 90 days thereafter, the Purchaser will
prepare a statement itemizing the out-of-pocket expenses of the
Dominick's Group incurred or accrued subsequent to the Balance Sheet
Date in connection with the Transactions. To the extent that the
aggregate amount of such expenses exceeds $2,500,000 (but excluding
the fee (but not the reimbursable expenses) payable to Goldman, Sachs
& Co. pursuant to the Goldman Letter Agreement), Dodi will pay the
amount of such excess to Dominick's. To the extent that the aggregate
amount of such expenses is less than $2,500,000, Purchaser will cause
the Dominick's

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Group to pay the difference between such lesser amount and $2,500,000
to Dodi. Any such payments shall be made by bank wire transfer of
immediately available funds to the account designated in writing by
the person entitled to the receipt thereof within ten business days
after Dodi's receipt of the aforesaid statement.

(c) On the fifth business day after the later to occur of
the first anniversary of the Closing Date or the date on which the
funds referred to below are released from the trust related thereto,
Holdings shall cause the Dominick's Group to pay to Dodi an amount
equal to the product of (i) .60 multiplied by (ii) the amount, if any,
by which $7,250,000 exceeds the out-of-pocket costs of the
compensation and benefits paid or payable by Dominick's to its senior
executive officers pursuant to the agreements identified in part 2(f)
of SCHEDULE 3.21 (but not any amendments thereto after the Closing
Date), to the extent such compensation and benefits are paid or
payable by reason of an employee's separation from service with
Dominick's within one year following the Closing Date. Holdings shall
cause the Dominick's Group to make such payment by bank wire transfer
of immediately available funds to the account designated in writing by
Dodi.

(d) Any payments made pursuant to this Section 2.3 shall
be adjustments to the purchase price for the Shares.

2.4 MERGER TRANSACTIONS. Immediately following the
consummation of the Stock Purchase Transaction, Holdings shall cause the Merger
Transactions to be completed.

2.5 CLOSING. The Closing shall take place at the offices
of Jenner & Block, One IBM Plaza, Chicago, Illinois 60611, at 10:00 A M., local
time, on the Closing Date, or at such other location as the parties shall
agree.

2.6 ALTERNATIVE TRANSACTION. At the election of
Purchaser, the Stock Purchase Transaction may be restructured to such other
form of transaction as Purchaser may determine to be appropriate; provided that
in the reasonable judgment of the Shareholders any such other form of
transaction does not result in any consequences to the Shareholders which are
less favorable to the Shareholder than the consequences which would have
resulted from the Stock Purchase Transaction, and further provided that
appropriate conforming changes to this Agreement and the Other Transaction
Documents satisfactory to the Shareholders are made.

ARTICLE III

WARRANTIES OF SHAREHOLDERS

The Shareholders hereby represent and warrant to Purchaser,
jointly and severally, as of the date hereof and as of the Closing Date, as
follows:

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3.1 AUTHORITY.

(a) Each of the Shareholders is a limited liability
company duly organized and validly existing under the laws of the
State of Illinois. The execution, delivery, and performance of this
Agreement and the Other Transaction Documents and the consummation of
the Transactions by each of the Shareholders has been duly authorized
by all necessary action on the part of the members and managers of
each of the Shareholders. This Agreement has been duly executed on
behalf of each Shareholder and constitutes the valid and binding
agreement of each Shareholder, enforceable against each Shareholder in
accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights, or the availability of
equitable remedies.

(b) The execution, delivery, and performance of the Other
Transaction Documents and the consummation of the transactions
contemplated thereby by each of the Shareholders and Other Transaction
Parties has been duly authorized by all necessary action on the part
of the members and managers of each of the Shareholders a party
thereto and the officers, board of directors and shareholders of each
of the Other Transaction Parties a party thereto. The Other
Transaction Documents, when duly executed and delivered on behalf of
each of the Shareholders and Other Transaction Parties a party
thereto, will constitute valid and binding agreements of each of them,
enforceable against each such Shareholder and Other Transaction Party
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights, or the
availability of equitable remedies.

3.2 ORGANIZATION AND QUALIFICATION.

(a) Each member of the Dominick's Group is a corporation
duly organized, validly existing and in good standing under the laws
of the state of its incorporation and possesses all necessary
corporate power and authority to (i) engage in the business in which
it is presently engaged, (ii) own all property currently owned by it,
(iii) lease all of the property currently used by it under lease, and
(iv) perform its obligations under the Other Transaction Documents
applicable to it. Sellers have caused the Dominick's Group to make
available to Purchaser complete and correct copies of the Certificate
or Articles of Incorporation and By-laws, as amended to date, and
minute books of each member of the Dominick's Group.

(b) Each member of the Dominick's Group is duly qualified
and in good standing in the jurisdictions in which the nature of its
business and properties requires such qualification as a foreign
corporation, except where the failure to so qualify would not have a
material adverse effect on the business or financial condition of the
Dominick's Group. SCHEDULE 32(B) sets forth with respect to each
member of the Dominick's Group the jurisdictions in which such member
is incorporated and currently qualified to do business as a foreign
corporation.

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3.3 CAPITAL STRUCTURE OF THE DOMINICK'S GROUP.

(a) The authorized capital stock of the Company consists
solely of (i) 100,000 shares of Common Stock, of which 40,000 shares
are outstanding and (ii) 100,000 shares of Preferred Stock, of which
66,000 shares are outstanding. All of the issued and outstanding
Shares of Common Stock and Preferred Stock of the Company are validly
issued, and fully paid and non-assessable. Other than the
Restructuring Transactions, there is no obligation binding upon the
Company to issue, sell, redeem, purchase or exchange any of its
capital stock or any right relating thereto.

(b) The authorized capital stock of Dominick's consists
solely of (i) 300,000 shares of common stock, $.10 par value per
share, of which 263,600 shares are outstanding as of the date hereof,
and 255,000 of which are owned of record by the Company, and (ii)
50,000 shares of Series B preferred stock, $.10 par value per share,
none of which are outstanding. All of the issued and outstanding
shares of capital stock of Dominick's are validly issued, fully paid
and non-assessable. Other than the Stock Redemption and stock
appreciation rights described in SCHEDULE 3.21, there is no obligation
binding upon Dominick's or any other member of the Dominick's Group to
issue, sell, redeem, purchase or exchange any of the Dominick's
Capital Stock or any right relating thereto.

3.4 TITLE TO SHARES AND STOCK OF DOMINICK'S AND THE
SUBSIDIARIES. The Shareholders own beneficially and of record all of the
issued and outstanding shares of Preferred Stock and Common Stock, and on the
Closing Date assuming completion of the Restructuring Transactions, DFLLC and
Dodi will own beneficially and of record all of the issued and outstanding
shares of Preferred Stock and Common Stock, respectively, and DFLLC and Dodi
shall transfer to Purchaser at the Closing, good, valid and marketable title to
the Preferred Stock and Common Stock free and clear of any Stock Encumbrances.
The Company owns beneficially and of record 255,000 of the issued and
outstanding shares of the Dominick's Capital Stock free and clear of any Stock
Encumbrances and on the Closing Date and after giving effect to the Stock
Redemption, the Company will own beneficially and of record all of the issued
and outstanding capital stock of Dominick's free and clear of any Stock
Encumbrances. Dominick's or one of the Subsidiaries owns beneficially and of
record all of the issued and outstanding capital stock of each of the
Subsidiaries free and clear of any Stock Encumbrances. There is no obligation
binding upon any of such Subsidiaries, or any other member of the Dominick's
Group, to issue, sell, redeem, purchase or exchange any of such Subsidiaries'
capital stock or any right relating thereto.

3.5 OTHER INVESTMENTS. Except as set forth on SCHEDULE
3.5 and except for Dominick's, the Subsidiaries, DDI and DPI and the Excluded
Affiliates' Property, neither the Company nor any other member of the
Dominick's Group has any direct or indirect subsidiaries and does not own,
either directly or indirectly, any capital stock or other equity or ownership
interest in any corporation, partnership, limited liability company,
association, trust, joint venture or other entity.

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3.6 FINANCIAL STATEMENTS.

(a) SCHEDULE 3.6(A) contains a true copy of the Financial
Statements. Except as set forth on SCHEDULE 3.6(A): (i) all of the
Financial Statements have been prepared from, and are consistent with,
the books and records of Dominick's and the Subsidiaries, (all of
which books and records are true and correct), and (ii) all of the
Financial Statements fairly present the financial position, as of the
date indicated, and the results of operations and other financial
information included therein, for the periods indicated, of Dominick's
and the Subsidiaries on a consolidated basis, and were prepared in
accordance with generally accepted accounting principles, consistently
applied; provided, that it is understood that the Interim Financial
Statements remain subject to customary year-end audit adjustments in
accordance with the past practices of Dominick's.

(b) The Company has, or as of the Closing Date will have,
no assets or liabilities (absolute, accrued, contingent or otherwise)
other than (i) cash, (ii) 255,000 shares of the Dominick's Capital
Stock, (iii) the capital stock of DDI and DPI, and (iv) the income tax
liabilities of the Dominick's Group, DDI and DPI as a consolidated or
combined group.

3.7 EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE. Except
as set forth on SCHEDULE 3.7, there has not been since the Balance Sheet Date:

(a) Any damage, destruction, loss or forfeiture (whether
or not covered by insurance) materially and adversely affecting (i)
any store, office, plant, warehouse or other operating facility or any
other material properties or assets of the Dominick's Group, or (ii)
the business or financial condition of the Dominick's Group;

(b) Any sale or transfer of any assets or properties,
other than in the ordinary course of business, which individually or
in the aggregate are material to the business of the Dominick's Group;

(c) Any direct or indirect redemption, purchase or other
acquisition by any member of the Dominick's Group of any capital stock
of itself or any other member of the Dominick's Group, or any
declaration, set aside or payment of any dividend or distribution on
the capital stock of any member of the Dominick's Group;

(d) (i) Except for normal periodic increases in the
ordinary course of business consistent with past practice, any
increase in the compensation payable or to become payable by any
member of the Dominick's Group to any of its officers, employees or
agents whose total compensation for services rendered to any member of
the Dominick's Group is currently at an annual rate of more than
$80,000 (collectively "PERSONNEL"), (ii) any bonus, incentive
compensation, service award or other like benefit granted, made or
accrued, contingently or otherwise, for or to the credit of any of the
Personnel, (iii) any employee welfare, pension, retirement,
profit-sharing or similar payment or arrangement made or agreed to by
any member of the Dominick's Group for any Personnel except pursuant
to the existing plans and arrangements described in the

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<PAGE> 23
Schedules hereto or (iv) any new employment agreement to which any
member of the Dominick's Group is a party;

(e) Any incurrence by any member of the Dominick's Group
of any indebtedness for borrowed money or of any other indebtedness or
of any liability in respect thereof, or any commitment by any member
of the Dominick's Group for such incurrence, except for the incurrence
of unsecured current liabilities (other than for borrowed money) and
borrowings under the existing revolving credit facilities in the
ordinary course of business;

(f) Any contractual commitment by any member of the
Dominick's Group to any third party, other than as provided in this
Agreement or arising in the ordinary course of business, relating to
(i) any material portion of the property, assets or business of the
Dominick's Group, (ii) the acquisition or disposition of any material
portion of the property or assets of the Dominick's Group, or (iii)
the acquisition or disposition of any real estate, other than renewals
of Leases in the ordinary course of business;

(g) Any transaction, other than at arm's length in the
ordinary course of business pursuant to agreements identified on
SCHEDULE 3.25 hereto, between any member of the Dominick's Group, on
the one hand, and any stockholder, director, officer or Affiliate of
any member of the Dominick's Group, on the other hand, or any waiver
or surrender by any member of the Dominick's Group of any valuable
right or property other than for fair consideration;

(h) Any unusual or novel method of transacting the
business of the Dominick's Group which has had, or is reasonably
likely to have, a material adverse effect on the assets or properties,
liabilities, financial condition or results of operations of the
Dominick's Group;

(i) Any change in any accounting procedures or practices
by the Dominick's Group;

(j) Any material adverse change in the assets or
properties, liabilities, financial condition, results of operations or
prospects of the Dominick's Group whether or not covered by insurance;

(k) Any addition to or modification of the employee
benefit plans, arrangements or practices described in the Schedules
hereto affecting employees other than (i) contributions made for the
year ended October 29, 1994 in accordance with the normal practices of
the Dominick's Group, or (ii) the extension of coverage to other
employees who became eligible after the Balance Sheet Date;

(l) Any forgiveness of any indebtedness due any member of
the Dominick's Group in excess of $50,000 or waiver of any rights of
substantial value to the Dominick's Group, whether or not in the
ordinary course of business;

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<PAGE> 24
(m) Any amendment, cancellation or termination of any
Contract, license or other instrument material to the Dominick's
Group;

(n) Any capital expenditures in excess of $100,000 (in
the aggregate) or the execution of any lease involving annual payments
in excess of $50,000 or any incurring of liability therefor by the
Dominick's Group, involving payments not reflected in the budget
provided to Purchaser on the date hereof;

(o) Any failure to repay any material obligation of any
member of the Dominick's Group, except in the ordinary course of
business or where such failure would not have a material adverse
effect on the business or financial condition of the Dominick's Group;

(p) Any failure to operate the business of the Dominick's
Group in the ordinary course so as to use reasonable efforts to
preserve the business intact, to keep available to Purchaser the
services of the Personnel, and to preserve for Purchaser the goodwill
of the Dominick's Group's suppliers, customers and others having
business relations with it except where such failure would not have a
material adverse effect on the business or financial condition of the
Dominick's Group;

(q) The creation or incurrence of any Lien on any assets
of the Dominick's Group, material singly or in the aggregate, except
purchase money mortgages arising in the ordinary course of business;

(r) Any issuance by any member of the Dominick's Group
of, or commitment by any member of the Dominick's Group to issue, any
shares of stock or other equity securities or obligations or
securities convertible into or exchangeable for shares of stock or
other equity securities;

(s) Any payment, discharge or satisfaction of any
liabilities other than the payment, discharge or satisfaction (i) in
the ordinary course of business and consistent with past practice of
liabilities reflected or reserved against in the Balance Sheet or
incurred in the ordinary course of business and consistent with past
practice since the Balance Sheet Date, and (ii) of other liabilities
involving $100,000 or less singly and $500,000 or less in the
aggregate;

(t) Any new collective bargaining agreement or any
amendment or other modification of any existing collective bargaining
agreement;

(u) Any transfer of assets or liabilities or any other
material transaction between any member of the Dominick's Group, on
the one hand, and the Excluded Subsidiaries or any other Affiliate
(other than another member of the Dominick's Group) of the Dominick's
Group or the Shareholders, on the other hand;

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<PAGE> 25
(v) Any agreement by any member of the Dominick's Group
to do any of the foregoing, except as expressly contemplated by this
Agreement or the Other Transaction Documents; or

(w) Any other event or condition of any character which
in any one case or in the aggregate has materially adversely affected,
or any event or condition known to Sellers (other than matters of
general public knowledge relating to general economic conditions or
the supermarket industry as a whole) which it is reasonable to expect
will, in any one case or in the aggregate, materially adversely affect
in the future, the condition (financial or otherwise), assets,
liabilities, working capital, reserves, earnings, business or
prospects of the Dominick's Group.

3.8 LIABILITIES. Except as set forth on SCHEDULE.3.8 or
on any of the other Schedules hereto, the Dominick's Group does not have any
material liabilities of a type normally reflected on a balance sheet (including
in the notes thereto) prepared in accordance with generally accepted accounting
principles that (a) if existing on the Balance Sheet Date, are not reflected on
the Balance Sheet, or (b) if existing on the Interim Balance Sheet Date, are
not reflected on the Interim Balance Sheet, or (c) if arising since the Interim
Balance Sheet Date, have not arisen in the ordinary course of business since
the Interim Balance Sheet Date.

3.9 ACCOUNTS AND NOTES RECEIVABLE. The accounts and
notes receivable of the Dominick's Group reflected on the Interim Balance Sheet
and the Balance Sheet and the accounts and notes receivable arising since the
Interim Balance Sheet Date and the Balance Sheet, respectively, arose from bona
fide transactions in the ordinary course of business.

3.10 INVENTORIES. The aggregate inventories reflected on
the Balance Sheet were properly stated therein and were valued in accordance
with the normal valuation policy of the Dominick's Group, consistently applied
and in accordance with generally accepted accounting principles. All items of
inventory reflected on the Balance Sheet, were acquired in the ordinary course
of business and as of the date thereof were usable and saleable in the ordinary
course of business of the Dominick's Group, except for normal shrinkage,
spoilage, and obsolescence. The inventories reflected on the books and records
of the Dominick's Group, considered in the aggregate, do not overstate the
inventories that would be verified by a physical inventory as of the date of
such records.

3.11 REAL PROPERTY.

(a) OWNED REAL PROPERTY. SCHEDULE 3.11(A) lists all of
the Owned Real Property. The Dominick's Group has good and marketable
fee simple title to the Owned Real Property (or, as the case may be,
the entire beneficial interest in the land trust holding title
thereto) free and clear of all Liens, subject only to the exceptions
set forth on SCHEDULE 3.11(A) and the Third Party Leases.

(b) LEASED REAL PROPERTY. SCHEDULE 3.11(B) lists all of
the Leased Real Property. The Dominick's Group's interest in each
parcel of Leased Real Property is

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<PAGE> 26
a leasehold interest under a Lease. Sellers have caused the
Dominick's Group to make available to Purchaser complete, true, and
correct copies of all Leases, and to the knowledge of Sellers, the
summaries of certain terms of those Leases included in the Lease
summaries in SCHEDULE 3.11(B) accurately reflect the Lease terms
stated therein. Except as set forth on SCHEDULE 3.11(B): (i) each
Lease is a valid and binding obligation of the parties thereto in
accordance with its terms and is in full force and effect except as
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors'
rights or the availability of equitable remedies; (ii) no member of
the Dominick's Group is in material default under any material
provision of any Lease and, to the knowledge of Sellers (without
inquiry of third parties), no lessor under any Lease is in material
default of any material provisions of any Lease; (iii) no event has
occurred which through notice, the passage of time or otherwise would
become a material default by any member of the Dominick's Group or, to
the knowledge of Sellers (without inquiry of third parties), any other
party, under any Lease; (iv) each Lease will continue in full force
and effect on the same terms as currently exist, notwithstanding the
consummation of the transactions contemplated by this Agreement; (v)
the leasehold interest of the Dominick's Group with respect to each
parcel of Leased Real Property is free and clear of all Liens; and
(vi) leasing commissions or other brokerage fees due from or payable
by the Dominick's Group with respect to the Leases have been paid in
full.

(c) THIRD PARTY REAL PROPERTY. SCHEDULE 3.11(C) lists
all of the Third Party Leases. Sellers have caused the Dominick's
Group to make available to Purchaser complete, true, and correct
copies of all Third Party Leases, and to the knowledge of Sellers, the
summaries of certain terms of those Third Party Leases in the Third
Party Lease summaries included in SCHEDULE 3.11(C) accurately reflect
the Lease terms stated therein. Except as otherwise set forth on
SCHEDULE 3.11(C): (i) each Third Party Lease is a valid and binding
obligation of the parties thereto in accordance with its terms and is
in full force and effect except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights or the availability of
equitable remedies; (ii) no member of the Dominick's Group is in
material default under any material provision of any Third Party Lease
and, to the knowledge of Sellers (without inquiry of third parties),
no lessee or sublessee or licensee or sublicensee under any Third
Party Lease is in material default of any material provision of any
Third Party Lease; and (iii) no event has occurred which through
notice, the passage of time or otherwise would become a material
default by any member of the Dominick's Group or, to the knowledge of
Sellers (without inquiry of third parties), any other party under any
Third Party Lease.

(d) CONDITION OF REAL PROPERTY; COMPLIANCE. Except as
set forth on SCHEDULE 3.11(D), Sellers have no knowledge: (i) of any
material structural defect in any of the buildings or other
improvements situated on the Real Property; or (ii) that any building
system, structure, fixture or improvement, owned, leased or used by
any member of the Dominick's Group and required for the conduct of the
business as currently conducted (including the operation of any closed
stores) is not in all material respects in good condition and working
order (reasonable wear and tear excepted) and

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<PAGE> 27
adequate in quality and quantity for the current normal operation of
the Dominick's Group's business. To the knowledge of Sellers, and
except as set forth on SCHEDULE 3.11(D), no part of the Real Property:
(i) is a nonconforming use, special use, or special exception not
permitted under, or is otherwise not in compliance with, applicable
zoning ordinances; or (ii) is located in a governmentally designated
flood plain, flood-prone area, flood-risk area or wetland or similarly
restricted area. There is presently full and free vehicular access to
and from public highways and roads to each parcel of the Real Property
to the extent required for the conduct of the retail operations (or,
if not a store, other operations) currently conducted by the
Dominick's Group. To the knowledge of Sellers, all utility companies
providing utilities to each parcel of the Real Property have adequate
rights of access to provide the services necessary for the conduct of
the business currently conducted by the Dominick's Group on the Real
Property. Except as set forth on SCHEDULE 3.11(D), to the knowledge
of Sellers: (i) the Real Property complies in all respects with all
federal state and municipal laws, ordinances, orders, regulations or
requirements, other than such laws, ordinances, orders, regulations or
requirements where the failure to comply would not have a material
adverse effect on the financial condition or results of operations of
the Dominick's Group; (ii) there are no special assessments, deferred
water or sewer charges or any deferred special assessments or special
charges pertaining to any portion of the Owned Real Property; and
(iii) neither the Real Property nor any material portion thereof, is
in violation of any building, zoning or other ordinance, building
code, or similar rule or regulation, other than such violations which
do not have a material adverse effect on the financial condition or
results of operations of the Dominick's Group. Except as set forth on
SCHEDULE 3.11(D), there are no pending legal actions, lawsuits or
administrative proceedings, including condemnation actions or rezoning
proceedings affecting all or any material portion of the Owned Real
Property or, to the knowledge of Sellers (without inquiry of third
parties), the Leased Real Property and, to the knowledge of Sellers,
none have been threatened against any portion of the Real Property.
To the extent that the foregoing provisions of this SECTION 3.11(D)
concerning compliance with laws, ordinances, orders, regulations,
codes, or rules relate to any Leased Real Property, the foregoing
representations shall be limited to the use of such Leased Real
Property by the Dominick's Group or to such other matters for which
any member of the Dominick's Group is responsible under a Lease or
other agreement.

(e) No member of the Dominick's Group has received
written, or to the knowledge of Sellers, other notice of any default
or breach by any member of the Dominick's Group under any covenants,
conditions, restrictions, rights-of-way, or easements which may affect
any parcel of the Real Property, and to the knowledge of Sellers, no
such default or breach now exists.

(f) Except for the Restructuring Transactions and except
as set forth in SCHEDULE 3.11(F), no member of the Dominick's Group is
a party to or bound by: (i) any agreement for the purchase by a
member of the Dominick's Group of any interest in real estate; (ii)
any agreement for the lease to a member of the Dominick's Group of any
interest in real estate not currently in possession of a member of the
Dominick's

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<PAGE> 28
Group; or (iii) any agreement for the sale by a member of the
Dominick's Group of any of the Real Property.

3.12 TANGIBLE PERSONAL PROPERTY. Except as set forth on
SCHEDULE 3.12, the Dominick's Group has good and marketable title to the
equipment, computer hardware, furniture, vehicles, rolling stock and other
tangible personal property which is purportedly owned by the Dominick's Group
and which is either (a) reflected on the Balance Sheet (except for personal
property disposed of in the ordinary course of business after the Balance Sheet
Date), or (b) used by the Dominick's Group in the conduct of its business
(whether or not reflected on the Balance Sheet), free and clear of any Liens.
Except as set forth on SCHEDULE 3.12, to the knowledge of Sellers, all such
tangible personal property is in good working condition and repair and
constitutes the tangible personal property necessary to the operation of the
business of the Dominick's Group as currently conducted. Except as set forth
on SCHEDULE 3.12 or any other Schedule hereto, no member of the Dominick's
Group is a party to any agreement requiring the payment by such member of an
amount in excess of $200,000 in any 12-month period for the purchase or lease
of any machinery, equipment or other capital assets other than Leased Real
Property.

3.13 CONTRACTS. SCHEDULE 3.13 lists the following
contracts and agreements to which any member of the Dominick's Group is a party
or otherwise bound, or to which any of the material rights, properties or
assets of a member of the Dominick's Group are subject or bound (collectively
the "CONTRACTS"): (a) mortgage, indenture, note, installment obligation or
other instrument relating to the borrowing of money; (b) guarantee of any
obligation; (c) letter of credit, bond or other indemnity (excluding
endorsements of instruments for collection in the Dominick's Group's ordinary
course of business); (d) currency or interest rate swap, collar or hedge
agreement; (e) agreement for the sale or lease by any member of the Dominick's
Group to any person of any material amount of the Dominick's Group's personal
properties other than the retirement or other disposition of assets no longer
useful to the Dominick's Group in the conduct of its business; (f) distributor,
representative, broker or advertising contract that is not terminable by the
Dominick's Group at will, or by giving notice of thirty (30) days or less,
without liability; (g) joint venture agreement, partnership agreement or power
of attorney; (h) agreement requiring the payment by any member of the
Dominick's Group to any person (other than another member of the Dominick's
Group) of more than $200,000 in any 12-month period for the purchase of goods
or services; (i) agreement imposing non-competition or exclusive dealing
obligations on any member of the Dominick's Group; or (j) contract, agreement,
understanding or other arrangement to which any member of the Dominick's Group
is a party or otherwise bound that is either (i) not terminable without penalty
or payment of any premium or costs and expenses of any kind immediately upon
notice of termination by the Dominick's Group (or Purchaser after the Closing
Date) to the other party or parties thereto, or (ii) is material to the
financial condition or business of the Dominick's Group and that is not
otherwise reflected on SCHEDULE 3.13. Sellers have caused the Dominick's Group
to make available to Purchaser complete, true and correct copies of all written
Contracts and a written summary of the material terms of any oral Contract
required to be disclosed in SCHEDULE 3.13 all as in effect as of the date
hereof. Except as otherwise set forth on SCHEDULE 3.13, to the knowledge of
Sellers, the Contracts are valid and binding obligations of the parties thereto
in accordance with their terms and are in full force and effect except as may
be limited by

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<PAGE> 29
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights or the availability of equitable
remedies. No member of the Dominick's Group nor any other party, is in default
in the payment of any material obligation under any Contract and no event has
occurred which through notice, the passage of time or otherwise would become a
material default by any member of the Dominick's Group or, to the knowledge of
Sellers, any other party, under any Contract which would have a material
adverse effect on the financial condition or results of operations of the
Dominick's Group.

3.14 INTELLECTUAL PROPERTY.

(a) SCHEDULE 3.14(A) lists all patent and trademark
registrations and copyright registrations, and applications pending or
to be filed therefor, which are owned by any member of the Dominick's
Group.

(b) SCHEDULE 3.14(B) lists all trademarks, trade names,
service marks, and other marks used by any member of the Dominick's
Group and not listed in SCHEDULE 3.14(A).

(c) To the knowledge of Sellers, the Dominick's Group
either owns, has by license agreements or has acquired by implied
licenses in connection with the acquisition of the properties and
assets of the Dominick's Group, rights to use the inventions,
processes, know-how, formulas, customer lists, trade secrets, patents,
trademarks, trade names, brand names and copyrights which are used in
connection with the operation of the properties, assets, business and
affairs of the Dominick's Group as of the date hereof. SCHEDULE
3.14(C) lists all such written license agreements to which any member
of the Dominick's Group is a party.

(d) Except as set forth on SCHEDULE 3.14(D), to the
knowledge of Sellers, no invention, process, know-how, formula,
customer list, trade secret, patent, trademark, trade name, brand name
or copyright which is owned by the Dominick's Group or used or
required in the conduct of the business of the Dominick's Group, is
involved in, or the subject of, any pending or threatened
infringement, interference, opposition or similar action, suit or
proceeding, or has been declared invalid or otherwise limited by any
court.

(e) To the knowledge of Sellers, all of the Software is
either (i) owned by the Dominick's Group free and clear of any Liens
which materially and adversely affect the marketability of title
thereto, or (ii) used by the Dominick's Group pursuant to a license
which is currently in effect. To the knowledge of Sellers, no such
Software license shall terminate or become terminable as a result of
the transactions contemplated by this Agreement. There are no
infringement suits pending or, to the knowledge of Sellers, threatened
against the Dominick's Group with respect to any of the Software and,
to the knowledge of Sellers, no fact or condition exists which would
give rise to any such infringement suit.

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3.15 COMPLIANCE WITH LAW. Except as set forth on SCHEDULE
3.15, and excepting matters relating to compliance with Environmental Laws as
to which the Shareholders' representations and warranties are made in SECTION
3.16, to the knowledge of Sellers, no member of the Dominick's Group is in
violation of any applicable statute, law, ordinance, decree, order, rule,
regulation, franchise, permit or license of any governmental body, except for
such violations which do not, and will not, individually or in the aggregate
have a material adverse effect on the financial condition or results of
operations of the Dominick's Group.

3.16 ENVIRONMENTAL MATTERS. Except as set forth on
SCHEDULE 3.16:

(a) The Dominick's Group has obtained all Permits which
are required under Environmental Laws for the operation of its
business, except where the failure to so obtain would not have a
material adverse effect on the financial condition or results of
operations of the Dominick's Group. All such Permits are currently in
effect and the appropriate member of the Dominick's Group is in
compliance with all material terms and conditions of such Permits.

(b) No member of the Dominick's Group has received
written notice of any civil criminal or administrative action, suit,
claim, hearing, violation, investigation, proceeding or demand against
any member of the Dominick's Group relating in any way to the use of
Hazardous Materials or compliance with Environmental Laws.

(c) There are no orders from or agreements with any
governmental or private party relating to violations of or compliance
with the Environmental Laws by any member of the Dominick's Group.

(d) There has been no storage, treatment, generation,
discharge, incineration or disposal of Hazardous Materials (other than
any substances customarily sold in the retail grocery business and
cleaning and maintenance supplies which have been used, stored and
disposed of in accordance with all Environmental Laws) on the Real
Property by any member of the Dominick's Group or, to the knowledge of
Sellers (without inquiry of third parties), by any other person.

3.17 LITIGATION. Except as set forth on SCHEDULE 3.17,
there is no action, order, writ, injunction, judgment or decree outstanding or
claim, suit, litigation, proceeding, labor dispute (other than routine
grievance procedures or routine, uncontested claims for benefits under any
benefit plans for Personnel), arbitral action or investigation pending or, to
the knowledge of Sellers, threatened or anticipated against, relating to or
affecting (i) any member of the Dominick's Group, (ii) any benefit plan for
Personnel or any fiduciary or administrator thereof or (iii) the transactions
contemplated by this Agreement or the Other Transaction Documents, which, if
adversely decided, would have a material adverse effect on the Dominick's
Group, any such plan or the transactions contemplated hereby or thereby,
respectively (collectively, "ACTIONS"). Neither Sellers nor any member of the
Dominick's Group is in default with respect to any judgment, order, writ,
injunction or decree of any court or governmental agency, and there are no
unsatisfied judgments against Seller, the Dominick's Group or the business or
activities of the Dominick's Group. To the knowledge of Sellers, except as

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<PAGE> 31
specifically noted on SCHEDULE 3.17, the Dominick's Group has not been advised
that there is a reasonable likelihood of an adverse determination of any Action
(or group of related Actions) which adverse determination, should it occur,
would have a material adverse effect on the business or financial condition of
the Dominick's Group.

3.18 NO RESTRICTIONS; CONSENTS. Except as set forth on
SCHEDULE 3.18, neither Sellers, nor any member of the Dominick's Group is
subject to any material restriction, agreement, law, judgment or decree which
would prohibit or be violated by the execution and delivery of this Agreement
or the Other Transaction Documents or the consummation of the Transactions, or
which would result in the acceleration of any material indebtedness of the
Dominick's Group. Except for such action as may be required pursuant to the
HSR Act and except as disclosed on SCHEDULE 3.18, SCHEDULE 3.11(B), SCHEDULE
3.11(C), or SCHEDULE 3.13, no member of the Dominick's Group is required to
obtain any consents or other approvals from any governmental agency or other
person (including, without limitation, any lessor, lender, or financial
institution) in order to avoid default as a result of the Transactions, except
for such consents or other approvals where the failure to so obtain does not
have a material adverse effect on financial condition or results of operations
of the Dominick's Group.

3.19 AUTHORIZATIONS. The Dominick's Group has all
authorizations, approvals and licenses, other than Permits, applicable to its
business or the use, ownership or occupancy of the Real Property necessary to
conduct the business of the Dominick's Group as it is presently conducted,
except for such authorizations, approvals, and licenses the lack of which would
not have a material adverse effect on the financial condition or results of
operations of the Dominick's Group ("AUTHORIZATIONS"). Except as set forth on
SCHEDULE 3.19, each Authorization is valid and in full force and effect, and
none of the Authorizations will be terminated or impaired or become terminable
as a result of the consummation of the Transactions. Neither Sellers nor any
member of the Dominick's Group has received written notice that any appropriate
governmental authority intends to cancel, terminate or not renew any
Authorization.

3.20 TAXES.

(a) FILING OF TAX RETURNS. To the knowledge of the
Shareholders, each of the Company, Dominick's, the Subsidiaries and
all members for income Tax purposes of any affiliated or combined
group of corporations (as defined in Section 1504(a) of the Code or
any analogous state, local or foreign provision) of which the Company
is the common parent (collectively, the "TAXPAYERS") have timely filed
(after giving effect to any extensions of time within which to make
such filing) with the appropriate taxing or other governmental
authorities all returns, reports, estimates, information returns and
statements required to be filed in respect of any Taxes (collectively,
"TAX RETURNS") on or before the Closing Date. The Tax Returns filed
are complete, correct and accurate in all material respects. Except
as set forth in SCHEDULE 3.20, none of the Taxpayers has requested any
extension of time within which to file such Tax Returns.

(b) PAYMENT OF TAXES. All Taxes for which any of the
Taxpayers are or may be liable or that are or may become due or
payable with respect to all taxable periods or

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<PAGE> 32
portions thereof ending on or before the Closing Date, other than as a
result of the Stock Purchase Transaction or the Merger Transactions,
have been timely paid, or will have been paid when due or within
applicable extensions of the time for payment thereof. The Taxpayers
have made, or as of the Closing Date will have made, adequate
provision, in conformity with generally accepted accounting
principles, consistently applied, for the payment of all Taxes which
may subsequently become due through the Closing Date other than as a
result of the Stock Purchase Transaction or the Merger Transactions.
All Taxes which any Taxpayer has been required to collect or withhold
have been duly collected or withheld and, to the extent required when
due, have been or will be duly paid to the proper taxing or other
governmental authorities.

(c) AUDIT HISTORY. Except as set forth in SCHEDULE 3.20,
no material deficiencies for Taxes of any of the Taxpayers have been
claimed, proposed or assessed by any taxing or other governmental
authority which have not been paid or discharged. Except as set forth
in SCHEDULE 3.20, there are no pending or, to the Sellers' knowledge
(without inquiry of third parties) threatened audits, investigations,
claims or assessments for or relating to any material liability in
respect of Taxes of any of the Taxpayers, and there are no matters
under discussion with any taxing or other governmental authorities
with respect to Taxes that are reasonably likely to result in an
additional liability for Taxes. Audits of federal state and local Tax
Returns by the relevant taxing authorities have been completed for the
period set forth in SCHEDULE 3.20 and, except as set forth in SCHEDULE
3.20, none of the Taxpayers has been notified that any taxing
authority intends to audit a Tax Return for any other period. Except
as set forth in SCHEDULE 3.20, no extension of a statute of
limitations relating to Taxes is in effect with respect to any of the
Taxpayers.

(d) TAX ELECTIONS. All elections with respect to Taxes
affecting any of the Taxpayers as of the date hereof are set forth in
SCHEDULE 3.20. No new elections with respect to Taxes, or any changes
in current elections with respect to Taxes, affecting any of the
Taxpayers shall be made after the date of this Agreement without
Purchaser's prior written consent. None of the Taxpayers (i) has made
or will make a deemed dividend election under former Treas. Reg.
Section 1.1502-32(f)(2) or a consent dividend election under Section
565 of the Code; (ii) has consented at any time under Section
341(f)(1) of the Code to have the provisions of Section 341(f)(2) of
the Code apply to any disposition of any of the Taxpayer's assets;
(iii) has agreed, or is required, to make any adjustment under Section
481(a) of the Code by reason of a change in accounting method or
otherwise; (iv) has made an election, or is required, to treat any
asset of any Taxpayer as owned by another person pursuant to the
provisions of Section 168(f) of the Code or as tax-exempt bond
financed property or tax-exempt use property within the meaning of
Section 168 of the Code; or (v) has made any of the foregoing
elections or is required to apply any of the foregoing rules under any
comparable state or local Tax provision.

(e) PRIOR AFFILIATED GROUPS. Except as set forth in
SCHEDULE 3.20 and except for the affiliated group in which the
Taxpayers are now members, none of the Taxpayers has at any time been
a member of an Affiliated group of corporations within the meaning of
Section 1504 of the Code.

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(f) TAX SHARING AGREEMENTS. All Tax-sharing agreements
or similar arrangements with respect to or involving the Taxpayers are
set forth in SCHEDULE 3.20. All Tax-sharing agreements or similar
arrangements (other than the Tax Matters Agreement) with respect to or
involving any of the Taxpayers shall be terminated prior to the
Closing Date, and, after the Closing Date, none of the Taxpayers shall
be bound thereby or have any liability under such agreements or
arrangements for amounts due in respect of periods prior to the
Closing Date.

(g) PARTNERSHIPS. Except as set forth in SCHEDULE 3.20,
none of the Taxpayers is subject to any joint venture, partnership, or
other arrangement or contract which is treated by the Taxpayers as a
partnership for federal income Tax purposes.

(h) FIRPTA WITHHOLDING. The Company is not, and was not
at any time during the five-year period ending on the date hereof, a
"United States real property holding corporation" as such term is
defined by Section 897(b)(2) of the Code. As a result, the Preferred
Stock and Common Stock does not constitute a "United States real
property interest" as such term is defined by Section 897(c)(1) of the
Code, and Purchaser will not be required to withhold any portion of
the Purchase Price pursuant to Section 1445 of the Code. The Sellers
agree to provide Purchaser prior to the Closing Date any certificate
necessary to substantiate exemption from such withholding.

3.21 COMPENSATION. SCHEDULE 3.21 contains a list, as of
the date hereof, of (a) each employee of the Dominick's Group whose present
base salary on an annualized basis is in excess of $80,000 and (b) the
aggregate amount of each such employee's current annual salary and most recent
bonus. SCHEDULE 3.21 also contains a list of the material benefits, other than
the Plans, that are available to the employees of the Dominick's Group who are
not members of a collective bargaining unit with which a member of the
Dominick's Group has entered into a collective bargaining agreement. No member
of the Dominick's Group is a party to or bound by any express employment or
consulting agreement or other agreement providing for severance payments or
other additional rights or benefits (whether or not optional) in the event of a
sale of such member or any other member of the Dominick's Group, other than the
Stock Redemption and those listed on SCHEDULE 3.21.

3.22 LABOR RELATIONS. SCHEDULE 3.22 contains a list of
each collective bargaining agreement to which any member of the Dominick's
Group is a party or otherwise bound. The Company has made available to
Purchaser complete, true, and correct copies of each collective bargaining
agreement listed on SCHEDULE 3.22. Except as set forth on SCHEDULE 3.22, as of
the date of this Agreement there is neither pending nor, to the knowledge of
Sellers, threatened any labor dispute, labor organizing activity, election
petition or proceeding, proceeding preparatory thereto, strike, or work
stoppage which affects or which may affect the Dominick's Group's business, or
which may interfere with their continued operations, and no member of the
Dominick's Group nor any officer, director, employee or agent of any thereof
has committed any material unfair labor practice as defined in the National
Labor Relations Act of 1947, as amended.

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3.23 ERISA AND THE PLANS.

(a) Except as listed on SCHEDULE 3.23, no member of the
Dominick's Group (or any other corporation or business entity which is
at the time aggregated with any member of the Dominick's Group under
Section 414 of the Code or Title IV of ERISA (an "ERISA AFFILIATE"))
maintains or otherwise contributes to or has an obligation to
contribute to, or may incur a liability under, and since January 1,
1989, has not maintained or contributed to or has had an obligation to
contribute to or has incurred a liability under, any Plans or
Multiemployer Plans. Any Multiemployer Plan to which any member of
the Dominick's Group is required to make contributions has been so
identified on SCHEDULE 3.23.

(b) With respect to each Plan, the Company has furnished
to Purchaser, to the extent applicable, true, complete and correct
copies of: (i) the Plan document; (ii) the most recent annual report
(Form 5500); (iii) the summary plan description; (iv) any applicable
trust agreement or insurance contract; and (v) any other documents
relating to such Plan filed with any governmental agency since January
1, 1994.

(c) Each member of the Dominick's Group, as applicable,
has operated and administered each of the Plans in compliance with
ERISA, the Code, the Age Discrimination in Employment Act and other
applicable laws and regulations and other authority promulgated
thereunder in all material respects.

(d) Other than as may be required by applicable federal
or state statute, the Plans do not provide health or medical benefits
for former employees or their dependents.

(e) Except as expressly set forth on SCHEDULE 3.23, no
member of the Dominick's Group and no ERISA Affiliate maintains any
deferred compensation or other executive compensation Plan with
respect to which there is any material unfunded liability.

(f) None of the Employee Pension Benefit Plans is a plan
which is subject to Section 412 of the Code or Title IV of ERISA.
Each Employee Benefit Pension Plan and each related trust agreement,
annuity contract or other funding instrument is qualified and
tax-exempt under the provisions of Code Sections 401(a) and 501(a) and
has been so qualified during the period from its adoption to date.

(g) No member of the Dominick's Group and no ERISA
Affiliate has, at any time, withdrawn from a Multiemployer Plan in a
"complete withdrawal" or a "partial withdrawal" as defined in Sections
4203 and 4205 of ERISA, respectively, so as to result in a liability,
contingent or otherwise (including, but not limited to, the
obligations pursuant to an agreement entered into in accordance with
Section 4204 of ERISA) of any member of the Dominick's Group or any
ERISA Affiliate. To the knowledge of Sellers (without inquiry of
third parties), if, as of the Closing, all members of the Dominick's
Group and all ERISA Affiliates were to withdraw from all Multiemployer
Plans to which

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<PAGE> 35
they (or any of them) have contributed or have been obligated to
contribute, they would incur no liability to such plans under Title IV
of ERISA which would be material to the business or financial
condition of the Dominick's Group. To the Sellers' knowledge (without
inquiry of third parties), with respect to each Multiemployer Plan:
(i) no such Multiemployer Plan has been terminated or has been in
reorganization under ERISA so as to result, directly or indirectly, in
any liability, contingent or otherwise, of the Company or any ERISA
Affiliate under Title IV of ERISA, (ii) no proceeding has been
initiated by any person (including the Pension Benefit Guaranty
Corporation) to terminate any such Multiemployer Plan, (iii) Sellers
have no reason to believe that any Multiemployer Plan will be
terminated or will be reorganized under ERISA and (iv) no member of
the Dominick's Group and no ERISA Affiliate has any present intention
to withdraw from any Multiemployer Plan or any expectation that such a
withdrawal may occur.

(h) Except as disclosed by Sellers to Purchaser with
respect to the Company's Key Manager Stock Ownership Plan, Key Manager
Stock Appreciation Rights Plan and the employment contracts identified
in part 2(f) of SCHEDULE 3.21, neither the execution and delivery of
this Agreement nor the consummation of the Transactions will result in
the acceleration or creation of any rights of any person to benefits
under any of the Plans or any other plan, policy, arrangement or
agreement maintained by or entered into by any member of the
Dominick's Group, including but not limited to the acceleration of the
exercisability of any stock options, the acceleration of the vesting
of any restricted stock, the acceleration of the accrual or vesting of
any benefits under any Plan or the creation of rights under any
severance, parachute or change of control agreement.

(i) No event has occurred and, to the best knowledge of
Sellers, there exists no condition or set of circumstances, in
connection with which any member of the Dominick's Group or any ERISA
Affiliate or any Plan, directly or indirectly, could be subject to any
material liability (except liability for benefits claims and funding
obligations payable in the ordinary course) (i) under ERISA, the Code,
or any statute, regulation or governmental order relating to the Plans
or (ii) pursuant to any obligation to indemnify any person against any
liability incurred under ERISA, the Code, or any statute, regulation
or governmental order relating to the Plans.

3.24 INSURANCE. SCHEDULE 3.24 lists all insurance
policies and bonds providing coverage for any member of the Dominick's Group
for losses or other events since October 31, 1993 on the assets, properties or
operations of any member of the Dominick's Group and the amounts and nature of
coverage with respect to each such policy. To the knowledge of Sellers, all of
such policies are sufficient for compliance with all requirements of law and of
all Contracts to which the Dominick's Group is a party. To the knowledge of
Sellers, the Dominick's Group is not in default under any of such policies or
binders, and the Dominick's Group has not failed to give any notice or to
present any claim under any such policy or binder in a due and timely fashion.
To the knowledge of Sellers, no coverage requested by the Dominick's Group in
the past five years has been denied and there are no facts upon which an
insurer might be justified in reducing coverage or increasing premiums on
existing policies or binders.

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3.25 RELATED PARTY TRANSACTIONS. Except as set forth on
SCHEDULE 3.25 hereto and except for this Agreement and the Other Transaction
Documents, no member of the Dominick's Group is a party to any agreement or
arrangement with or for the benefit of: (a) any director or officer of any
member of the Dominick's Group, (b) DDI, DPI, or any of the Shareholders, (c)
any director or officer of DDI or DPI, (d) any member or manager of any of the
Shareholders, or (e) any Affiliate of any of the Shareholders (other than
another member of the Dominick's Group).

3.26 BANK ACCOUNTS. SCHEDULE 3.26 contains a true and
complete listing of all bank deposit accounts or other depositary accounts
maintained by any member of the Dominick's Group and the authorized signatories
thereto.

3.27 NO CONFLICT OR VIOLATION. Except as set forth in
SCHEDULE 3.27 (or, with respect to clause (d) below, SCHEDULES 3.11(B),
3.11(C), 3.13, 3.18, OR 3.21), neither the execution and delivery of this
Agreement or the Other Transaction Documents, nor the performance by the
Shareholders or the members of the Dominick's Group of their respective
obligations hereunder and thereunder, nor the consummation of the Transactions,
will (a) conflict with the charter documents or bylaws of the Shareholders or
the members of the Dominick's Group; (b) assuming satisfaction of the
requirements set forth in clause (c) below, violate any statute, law,
ordinance, rule or regulation, applicable to the Shareholders, the Company or
any other member of the Dominick's Group or any of their respective properties
or assets; (c) except for (i) requirements arising out of the HSR Act, (ii)
requirements of state liquor licensing, pharmacy and similar licensing laws,
and (iii) such as may be required because Holdings or Purchaser is a party to
this Agreement, require any consent or approval of, of filing with or notice
to, any public body or authority, domestic or foreign, under any provision of
law applicable to the Dominick's Group; (d) require any consent, approval or
notice under, or violate, breach, be in conflict with or constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, or permit the termination of any provision of, or result in the
termination of, the acceleration of the maturity of, or the acceleration of the
performance of any obligation of the Dominick's Group or result in the creation
or imposition of any lien upon any properties, assets or business of the
Dominick's Group under, any Lease, Third Party Lease, Contract or other
material agreement to which any member of the Dominick's Group is a party, or
any order, judgment or decree to which any member of the Dominick's Group is a
party or by which any member of the Dominick's Group or any of their respective
assets or properties is bound or encumbered, except for such violations,
conflicts, defaults or other occurrences which, in the aggregate would not
have, and could not reasonably be expected to have, a material adverse effect
on the Dominick's Group, and would not prevent or delay the Stock Purchase
Transaction or otherwise prevent the Shareholders from performing their
obligations under this Agreement.

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ARTICLE IV

WARRANTIES OF PURCHASER AND HOLDINGS

Purchaser and Holdings hereby represent and warrant to Sellers,
jointly and severally, as of the date hereof and as of the Closing Date, as
follows:

4.1 AUTHORITY. The execution, delivery and performance
of this Agreement and all other agreements and instruments to be executed in
connection herewith or pursuant hereto, and the consummation of the
transactions contemplated hereby by each of Purchaser and Holdings have been
duly authorized by all necessary action on the part of each of Purchaser and
Holdings, and this Agreement and such other agreements and instruments
constitute the valid and binding obligations of each of Purchaser and Holdings,
enforceable in accordance with the terms thereof, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights or the availability of equitable
remedies.

4.2 ORGANIZATION, STANDING AND CORPORATE AUTHORITY. Each
of Purchaser and Holdings is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and possesses all
necessary corporate power and authority to perform its obligations under this
Agreement and all other agreements and instruments to be executed in connection
herewith or pursuant hereto.

4.3 HOLDINGS PREFERRED STOCK. The Holdings Preferred
Stock, upon issuance and delivery and payment therefor in the manner described
herein and in the Stock Exchange Agreement, will be duly authorized, validly
issued, fully paid and non-assessable.

4.4 PURCHASE FOR INVESTMENT. Purchaser is purchasing the
Shares for investment and not with a view to any public resale or other
distribution thereof Purchaser has no intention of selling the Shares in a
public distribution in violation of federal securities laws or any applicable
state securities laws. Purchaser acknowledges that the Shares have not been
registered under the Securities Act of 1933, as amended, or any state
securities laws, and that the Shares may not be resold absent such registration
or unless an exemption therefrom is available.

4.5 NO RESTRICTIONS; CONSENTS. Neither Purchaser nor
Holdings is subject to any material restriction, agreement, law, judgment or
decree which would prohibit or be violated by either (a) the execution and
delivery of this Agreement and all other agreements and instruments to be
executed in connection herewith or pursuant hereto, or (b) the consummation of
the transactions contemplated by this Agreement or any of the other agreements
and instruments to be executed in connection herewith or pursuant hereto.
Except for such actions as may be required pursuant to the HSR Act, neither
Purchaser nor Holdings is required to obtain any consents or other approvals
from any governmental agency or other person (including, without limitation,
any lessor, lender, or financial institution) in order to avoid default as a
result of the transactions contemplated by this Agreement or any of the other
agreements and instruments to be executed in connection herewith or pursuant
hereto.

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<PAGE> 38
4.6 NO CONFLICT OR VIOLATION. Neither the execution and
delivery of this Agreement or any of the other agreements and instruments to be
executed in connection herewith or pursuant hereto, nor the performance by
Purchaser or Holdings of their respective obligations hereunder or thereunder,
nor the consummation of the transactions contemplated hereby and thereby, will
(a) conflict with the charter documents or bylaws of Purchaser or Holdings, (b)
violate any statute, law, ordinance, rule or regulation applicable to Purchaser
or Holdings, or (c) except for requirements arising out of the HSR Act, require
any consent or approval of, or filing with notice to, any public body or
authority, domestic or foreign, under any provision of law applicable to
Purchaser or Holdings.

4.7 COMMITMENTS. Purchaser has delivered to sellers true
and correct copies of letters (the "COMMITMENT LETTERS") and received from
Bankers Trust Company and The Chase Manhattan Bank, N.A. (dated January 11,
1995) with respect to certain secured bank facilities and from Bankers Trust
New York Corporation and Chase Securities, Inc. (dated January 12, 1995) with
respect to certain unsecured, subordinated debt financing (such persons, or
such other reputable financial institutions delivering replacement commitments
no less favorable to Sellers, being collectively referred to as the "FINANCING
SOURCES"). Upon the acceptance thereof by the Purchaser and Holdings, the
Commitment Letters will be in full force and effect and, along with the
Holdings Preferred Stock and the funds to be provided by the New Equity
Investors at the Closing, provide for all of the financing needed by Purchaser
to consummate the transactions contemplated hereby and to fund the anticipated
working capital requirements of the Dominick's Group after the Closing.

ARTICLE V

COVENANTS OF SELLERS

5.1 CONDUCT OF BUSINESS.

(a) Except as may be otherwise required by this Agreement
or any of the Other Transaction Documents, or except as Purchaser may
otherwise consent in writing, between the date hereof and the Closing
Date, Sellers will cause each member of the Dominick's Group to: (i)
in all material respects, operate its business only in the ordinary
course; (ii) use its best efforts to preserve intact its business
organization; (iii) refrain from opening or closing stores except
pursuant to its existing business plans as disclosed to Purchaser; or
(iv) maintain its material properties and equipment in sufficient
operating condition and repair to enable it to operate in all material
respects in the manner in which it has operated during the
twelve-month period immediately preceding the date hereof, except for
maintenance required by reason of fire, flood or acts of God; (v)
continue all its material existing policies of insurance (or
comparable insurance) in full force and effect at commercially
reasonable rates and to diligently pursue all claims related thereto;
(vi) maintain inventories consistent with past practices; (vii) pay
amounts due to vendors consistent with past practices; and (viii) use
its best efforts to preserve its material relationships with its
lenders, suppliers, customers, licensors, and licensees

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<PAGE> 39
and others having material business dealings with it such that its
business will not be impaired.

(b) Except as may be otherwise required by this Agreement
or any of the Other Transaction Documents or except as Purchaser may
otherwise consent in writing, between the date hereof and the Closing
Date, the Shareholders will not permit the Dominick's Group to: (i)
incur any debt, liability or obligation, direct or indirect, whether
accrued, absolute, contingent or otherwise, on behalf of or with
respect to its business, other than unsecured current liabilities
(other than for borrowed money) and borrowings under the existing
revolving credit facilities incurred in the ordinary course of
business; (ii) assume, guarantee, endorse or otherwise become
responsible for the obligations of, or make any advances to any other
person, except in the ordinary course of business; (iii) mortgage,
pledge or otherwise encumber any material portion of its properties or
assets (including any parcel of Real Property); (iv) sell, license,
lease, transfer or dispose of any material portion of its properties
or assets (including any parcel of Real Property) or compromise,
release or assign any material indebtedness owed to it or any claims
held by it which relate to its business, in each case, other than in
the ordinary course of business; (v) make any material investment of a
capital nature whether by contributions to capital, property transfers
or otherwise, or by the purchase of any property or assets of any
other person; (vi) enter into, terminate or substantially amend or
supplement any Lease or enter into, terminate or substantially amend
or supplement any Contract or Third Party Lease other than in the
ordinary course of business consistent with past practice; (vii) enter
into, terminate, modify or supplement any collective bargaining
agreement; (viii) except for currently scheduled base salary increases
and except for reductions in force and other lay-offs consistent with
its current business plan, change in any material manner the
compensation or fringe benefits of any of the officers, directors or
employees employed in the Dominick's Group or establish or create any,
or modify as to benefits any existing, Plan or other compensation
plan, program or arrangement which relates to any officer, director or
employee employed in the Dominick's Group; (ix) take any action which
is inconsistent with any of the warranties or covenants of the
Shareholders contained in this Agreement; (x) waive or commit to waive
any rights of material value to the properties, assets, business,
operations or financial condition of the Dominick's Group; (xi)
declare or pay any dividend or distribution (other than (A) dividends
declared by Dominick's in the amount of $3.00 per share and share
equivalent, (B) dividends declared by DDI or DPI which are derived
from the operations of DDI or DPI in the ordinary course, and (C)
dividends declared by the Company of any amounts received by it
pursuant to sub-clause (A), (B) or (C) of this clause (xi) or other
dividends declared and paid by the Company after notice to Purchaser),
issue any capital stock or rights related thereto, or transfer any
property or assets to, or assume any liabilities from, DDI or DPI;
(xii) make or commit to make any capital expenditures in excess of
$250,000 in the aggregate, other than those identified in the budget
delivered on the date hereof and made consistent with the business
plan of the Dominick's Group and other than expenditures for routine
maintenance and repair; or (xiii) enter into a contract or commitment
to do any of the things described in the preceding clauses (i) through
(xii).

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5.2 ACCESS PENDING CLOSING. From the date hereof to and
including the Closing Date, Sellers shall cause each member of the Dominick's
Group to grant Purchaser, the New Equity Investors, and the Financing Sources
and their respective counsel, accountants and other representatives the right
to full and complete access to the books, records, offices and other facilities
of the Dominick's Group, during normal business hours, and to the officers and
agents of the Dominick's Group, for the purpose of making such investigation of
the financial condition and operations of the Dominick's Group as Purchaser,
the New Equity Investors, or such Financing Sources may reasonably deem
necessary. Sellers shall cause the Dominick's Group to furnish promptly to
Purchaser or such other persons all information concerning its business,
properties and Personnel as Purchaser or such other persons may reasonably
request. No investigation pursuant to this Section 5.2 or otherwise shall
affect the representations or indemnities of the Shareholders hereunder or the
conditions to Purchaser's obligation to consummate the Stock Purchase
Transaction.

5.3 FURTHER ASSURANCES AND COOPERATION. Subject to the
terms and conditions herein provided, the Shareholders agree to use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the Transactions and to cooperate
with Purchaser in connection therewith, (a) to obtain all necessary waivers,
consents and approvals from other parties to material loan agreements, leases
and other contracts, (b) to defend any lawsuits or other legal proceedings
challenging this Agreement or the consummation of the Transactions, (c) to lift
or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the Transactions, (d) to
effect all necessary registrations and filings (including any registrations and
filings which may be required to be made by Purchaser or its Affiliates in
connection with the Financing or otherwise), (e) to obtain at the sole cost and
expense of the Purchaser all surveys and title reports, commitments and/or
policies for each parcel of Leased Real Property requested by Purchaser and
such estoppels as Purchaser may request, and (f) to fulfill all conditions to
this Agreement. Prior to the Closing, Sellers shall cause each member of the
Dominick's Group to use its best efforts to obtain, at its sole expense, all
consents and other approvals from any governmental agency, bureau or authority,
or any other person (including any lender or lessor), which are necessary in
connection with the Transactions by or on behalf of Sellers or the Dominick's
Group. Without limiting the foregoing, at the sole cost and expense of
Purchaser, Sellers shall cause the auditors for the Dominick's Group to deliver
to Purchaser's Financing Sources, if requested, customary comfort letters and
certificates, in form and substance reasonably acceptable to Purchaser, which
may be required in connection with the Financing.

5.4 SURVEYS; TITLE INSURANCE.

(a) SURVEYS. At least thirty (30) days prior to the
Closing Date, Sellers shall cause the Dominick's Group to furnish to
Purchaser, at the sole cost and expense of the Dominick's Group, a
current urban ALTA/ACSM Land Title Survey prepared by duly-licensed
land surveyors in form reasonably satisfactory to Purchaser, dated
within 180 days prior to the Closing for each parcel of Owned Real
Property. Without limitation of the foregoing, the survey shall
contain an ALTA certification, acceptable to the Title

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<PAGE> 41
Company, sufficient to enable the Title Company to remove the standard
survey exceptions in the title insurance policy.

Purchaser shall have a period of twenty (20) days after
receipt of any survey pursuant to this Section 5.4 to notify Sellers
in writing as to any condition disclosed by such survey that
constitutes a Defect. Failure by Purchaser to deliver such written
notice to Sellers within such twenty (20) day period shall be deemed
acknowledgement by Purchaser that the survey does not disclose a
Defect.

(b) TITLE COMMITMENTS. At least thirty (30) days prior
to the Closing Date, Sellers shall cause the Dominick's Group to
furnish to Purchaser, at the sole cost and expense of the Dominick's
Group, a title insurance commitment, 1992 ALTA Form B, issued by the
Title Company, agreeing to issue to the party which holds or, as a
result of the consummation of the transactions contemplated by this
Agreement, will hold title to each parcel of Owned Real Property, an
owner's policy in the amounts reasonably determined by Purchaser and
showing title to each parcel of Owned Real Property to be free and
clear of all Defects, and containing such endorsements as Purchaser or
Purchaser's Financing Sources may require. The premium for all such
policies shall be paid by the Dominick's Group on or before the
Closing. Sellers shall cause the Title Company, at the sole expense
of the Dominick's Group to remove all standard exceptions from the
title insurance commitments on or before the Closing Date. Purchaser
shall have a period of twenty (20) days after receipt of any title
commitment pursuant to this Section 5.4 hereof to notify Sellers in
writing of the existence of any condition of title that constitutes a
Defect. Failure by Purchaser to deliver such written notice to
Sellers within such twenty (20) day period shall be deemed
acknowledgement by Purchaser that the title commitment does not
disclose a Defect.

(c) DEFECTS. If any of the surveys or title commitments
delivered by the Dominick's Group to Purchaser pursuant to this
Section 5.4 hereof disclose Defects, said Defects shall be cured, at
the sole cost and expense of Sellers, on or before the Closing Date or
within thirty (30) days after delivery to Sellers of written notice
from Purchaser disclosing the Defect(s), whichever date is earlier.
If Sellers decline to so cure all Defects, or if Sellers decline to
cause all Defects to be insured over by the Title Company in a manner
reasonably satisfactory to Purchaser, then Purchaser may, as its sole
and exclusive remedy, either (i) if the aggregate cost to cure or
insure over such Defects exceeds $1,000,000, terminate this Agreement
by written notice to Sellers given within ten (10) days after
expiration of the cure period, or (ii) proceed to close by (A)
deducting from the cash otherwise due Dodi at Closing the amount
necessary to cure such Defects (if such Defects are of a liquidated
nature and an ascertainable amount of money) and/or (B) escrowing with
the Title Company the amount necessary (not to exceed $1,000,000 in
the aggregate) to cause the Title Company to insure and/or endorse
over such Defects, provided that the terms of such insurance and/or
endorsements are reasonably satisfactory to Purchaser.
Notwithstanding the foregoing, if the aggregate cost to cure or insure
over any one or more Defect(s) exceeds an amount equal to the greater
of $1,000,000 or ten percent (10%) of the current fair market value of
any parcel of Owned Real Property, Sellers shall have the right to
decline to cure such Defect(s) and

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terminate this Agreement by written notice to Purchaser given within
ten (10) days after expiration of the cure period.

5.5 RESTRUCTURING TRANSACTIONS. At least one business
day prior to the Closing, the Shareholders shall cause the Company and
Dominick's to consummate the Restructuring Transactions.

5.6 EXCLUDED PROPERTIES LEASES. Immediately subsequent
to the Restructuring Transactions, the Shareholders shall cause the new legal
title holder or holders of the Excluded Dominick's Property to execute and
deliver the Excluded Properties Leases to Purchaser and Dominick's.

5.7 ALTERNATIVE PROPOSALS. During the period that this
Agreement is in effect, none of the Sellers or any other members of the
Dominick's Group, or any of their respective officers, employees,
representatives or agents, will directly or indirectly, solicit or initiate any
discussions or negotiations with, or participate in any negotiations with or
provide any information to or otherwise participate in any negotiations with or
provide any information to or otherwise cooperate in any other way with any
corporation, partnership, person or other entity or group (other than Purchaser
and Holdings) concerning any merger, sale of substantial assets, sale of shares
of capital stock or similar transaction (other than the Transactions, to the
extent permitted by the other applicable provisions of this Agreement)
involving any member of the Dominick's Group or control thereof (all such
transactions being referred to herein as "ALTERNATIVE TRANSACTIONS"). Sellers
shall immediately notify Purchaser of the receipt of any offers with respect to
an Alternative Transaction and the identity of the person making such offer.

5.8 FINANCIAL INFORMATION. Seller shall deliver to
Purchaser as soon as available all interim financial statements and other
management reports generated in the ordinary course of business prepared by or
for the Dominick's Group. In addition, prior to the Closing, the Shareholders
shall cause Ernst & Young, the Company's independent public accountants, to
prepare and deliver to Purchaser at the joint cost and expense of Purchaser and
the Shareholders (in equal shares) audited financial statements of the Company
and its consolidated subsidiaries (other than the Excluded Subsidiaries) for
the three most recent full fiscal years covered by the Financial Statements.

5.9 ENVIRONMENTAL REPORTS.

(a) As soon as practicable after the date hereof,
Purchaser shall make such inspection of the Real Property as it deems
appropriate (and which may consist, in part, of a review by its
consultants of existing Dominick's reports) in order to determine the
presence, or potential presence, of hazardous, toxic or other
substances (including asbestos) and to determine compliance with
Environmental Laws, i.e., a customary "Phase I" inspection. The
inspection may also include "Phase II" inspections if deemed advisable
by Purchaser based on the advice of its consultants. Sellers will
cause the Dominick's Group to cooperate in such inspections, provided
that such inspections shall be performed at Purchaser's sole cost and
risk, and by an individual or firm identified

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by Purchaser and reasonably acceptable to Sellers, and such
inspections shall be completed within 30 days after the date hereof
and, in the event a "Phase II" inspection is undertaken, within 45
days after the date hereof. The inspector, after conducting its
inspection, shall first inform Sellers and Purchaser concurrently of
its findings orally. Any written report shall be marked "draft" and
shall be submitted simultaneously to counsel for each party for its
reasonable approval before being distributed to any third party, the
identity of which shall be subject to the reasonable approval of the
party not requesting such distribution. The findings of all such
reports and investigations shall be treated as Evaluation Material to
the extent permitted by applicable law.

(b) If the inspector's report identifies the presence, or
potential presence, of any Hazardous Materials or friable or damaged
asbestos on the Real Property (or on any other real property if it
appears that any member of the Dominick's Group may have
responsibility therefor), the remediation of which is required by the
Environmental Laws as reasonably determined by Purchaser and Sellers,
Purchaser and Sellers shall share the actual "remediation costs"
(which term shall not include any investigation or evaluation or other
similar costs incurred by Purchaser other than costs incurred by
Purchaser after the Closing Date to produce data used in the
characterization and remediation of the liability or obligation
subject to this Section 5.9) required by the Environmental Laws to be
expended to remediate such substances after the Closing Date in
accordance with the following allocation: Purchaser and Sellers shall
split equally such remediation costs up to $10,000,000; Sellers shall
pay 75% and Purchaser shall pay 25% of such remediation costs in
excess of $10,000,000 up to $20,000,000. The determination of the
scope and methodology of any such remediation shall be subject to the
reasonable approval of Sellers and consistent with the recommendations
contained in the reports, it being understood that any such scope and
methodology shall be designed to afford Purchaser reasonable use of
the property during the period of remediation. Sellers shall promptly
reimburse Purchaser for Seller's share of such costs upon the receipt
of any statement for such costs incurred by Purchaser to effect any
such remediation. In the event that any such remediation costs are
reasonably estimated to exceed $20,000,000, Purchaser shall be
entitled to terminate this Agreement on 10 days prior written notice
to Sellers, unless within 5 days after Sellers' receipt of such notice
Sellers agree in writing to pay 100% of such remediation costs in
excess of $20,000,000. Notwithstanding the foregoing, remediation
costs related to the Dominick's Excluded Properties shall be allocated
as provided in the Excluded Properties Leases and shall not be subJect
to the sharing arrangement provided in this Section 5.9(b).

5.10 STOCK REDEMPTION. At least one business day prior to
the Closing, Sellers will cause Dominick's to: (a) acquire all right, title
and interest in and to the 8,600 shares of Dominick's Capital Stock not already
owned by the Company, for an aggregate purchase price of $12,761,205 in cash;
and (b) discharge and satisfy all rights of Dominick's Group employees with
respect to the 20,860 stock appreciation rights relating to Dominick's Capital
Stock for an aggregate net cost to Dominick's of $26,930,919, payable, subject
to applicable withholding, in the form of a promissory note or notes due not
later than the fifth business day after the Closing Date and otherwise in form
and substance reasonably satisfactory to Purchaser and Sellers.

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<PAGE> 44
5.11 STOCK DISPOSITION. At least one business day prior
to the Closing, Sellers will cause the Company to dispose of the capital stock
of DDI and DPI on terms and conditions satisfactory to Sellers and Purchaser.

5.12 CLOSING. Sellers shall use their best efforts to
cause the conditions specified in Article VIII hereof to be satisfied on or
before the Closing Date.

ARTICLE VI

COVENANTS OF PURCHASER

6.1 BOOKS AND RECORDS. In connection with either (a) any
tax audit of Sellers, the Excluded Affiliates' Assets or the Excluded
Properties, (b) the preparation of any tax return of the Shareholders, DDI,
DPI, the Excluded Affiliates' Assets or the Excluded Properties, (c) the
defense of any claim brought against the Shareholder, DDI, DPI, the Excluded
Affiliates' Assets or the Excluded Properties, or (d) for any other proper
purpose, Purchaser will cause the Dominick's Group to make available to the
Shareholders, at the Shareholders' request and expense from time to time, all
books and records of the Dominick's Group either existing on or relating to any
transaction on or prior to the Closing Date, for inspection or copying by the
Shareholders at any reasonable time for a period of six (6) years after the
Closing Date.

6.2 CONFIDENTIALITY.

(a) Unless and until the Closing shall have occurred,
neither Purchaser nor any of its Affiliates, employees or agents will
use any of the Evaluation Material for itself or for any other person,
firm, corporation, partnership or other entity, or disclose any of the
Evaluation Material to any person, firm, corporation, partnership or
other entity, except that (i) any of such information may be disclosed
to Purchaser's directors, officers, partners, and employees and the
New Equity Investors and the Financing Sources and their respective
representatives who need to know such information for the purpose of
evaluating any possible transaction between Sellers and Purchaser (i)
being understood that such directors, officers, partners, employees
and representatives shall be informed by Purchaser of the confidential
nature of such information and shall be directed by Purchaser to treat
such information confidentially), and (ii) disclosure of such
information may be made with the written consent of Sellers. Unless
and until the Closing shall have occurred, Purchaser shall furnish to
Sellers at their request, a List of all persons (other than
Purchaser's directors, officers, partners and employees) to whom
Purchaser has disclosed any Evaluation Material.

(b) Neither Purchaser nor any of its officers, directors,
partners, Affiliates, employees or agents will, at any time, use any
of the Evaluation Material which relates to the Shareholders, DDI,
DPI, the Excluded Affiliates' Assets, or the Excluded Properties for
itself or for any other person, firm, corporation, partnership or
other entity for any reason whatsoever except in connection with the
exercise of Purchaser's rights under Article XII hereof or under the
Tax Matters Agreement.

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<PAGE> 45
(c) If this Agreement is terminated and abandoned as
provided in Article X hereof, then at Sellers' request Purchaser shall
return to Sellers all documents and materials supplied to Purchaser by
Sellers or any member of the Dominick's Group which contain any
Evaluation Material and Purchaser will not retain any copies, extracts
or other reproduction in whole or in part of any Evaluation Material.
All documents, memoranda, notes and other writings whatsoever prepared
by Purchaser or its advisors based on the information in the
Evaluation Material shall be destroyed, and such destruction shall be
certified in writing to Sellers by an authorized officer of Purchaser
supervising such destruction.

6.3 EXCLUDED PROPERTIES LEASES. Contemporaneously with
the Closing, Purchaser shall cause Dominick's to execute and deliver the
Excluded Properties Leases to DDLLC.

6.4 DEFINITIVE FINANCING AGREEMENTS. Purchaser and
Holdings shall use their best efforts to negotiate, prepare and enter into
definitive financing agreements (the "DEFINITIVE FINANCING AGREEMENTS") with
the Financing Sources to provide the financing set forth in the Commitment
Letters (the "FINANCING"). The amount of such Financing and the terms and
conditions of such Definitive Financing Agreements shall be consistent with the
amounts and terms contemplated by the Commitment Letters. All the parties
hereto shall use their best efforts to satisfy on or before the Closing Date,
all requirements of the Definitive Financing Agreements which are conditions to
closing the transactions constituting the Financing. Holdings shall promptly
notify Sellers of any material change to, or revocation of, any Commitment
Letter.

6.5 CLOSING. Purchaser will use its best efforts to
cause the conditions specified in Article IX hereof to be satisfied on or
before the Closing Date.

ARTICLE VII

HSR ACT COMPLIANCE

Purchaser and Shareholders agree that, with respect to each
reportable transaction to which it is a party, each will, as soon as reasonably
practicable, take all action (to the extent not previously taken) necessary in
order to file with the Federal Trade Commission and the Department of Justice
all filings, reports and other information required under the HSR Act in order
to commence the running of the waiting period thereunder, to continue the
running of said waiting period (including any extensions) and prevent or
minimize any tolling thereof, to cause such waiting period to expire without
enforcement action, and to provide to each other such cooperation as may be
necessary in order to cause such filings and reports to be prepared and duly
filed and all waiting periods to expire. Each party hereto shall promptly
inform the other of any material communication between such party and the
Federal Trade Commission, the Department of Justice or any other government or
governmental authority regarding this Agreement. If any party receives a
request for additional information or documentary material from any such
government or governmental authority, then such party shall endeavor in good

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faith to make, or cause to be made, as soon as reasonably practicable and after
consultation with the other party, an appropriate response to such request.
Notwithstanding the foregoing, in connection with proceedings under or relating
to the HSR Act, or any other federal or state antitrust law, all analyses,
appearances, presentations, memoranda, briefs, arguments, and opinions made or
submitted by or on behalf of any party hereto shall be subject to the joint
approval or disapproval and the joint control of Purchaser and the
Shareholders, acting with the advice of their respective counsel, provided that
nothing herein shall prevent any party hereto or their authorized
representatives from making or submitting any such analysis, appearance,
presentation, memorandum, brief, argument, or opinion in response to a subpoena
or as otherwise required by law.

ARTICLE VIII

CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE

The obligation of Purchaser hereunder to proceed with the
Closing is subject to the satisfaction on or before the Closing Date of each of
the following conditions, unless waived in writing by Purchaser:

8.1 WARRANTIES. The warranties of Sellers contained
herein shall be true and correct in all material respects on and as of the
Closing Date.

8.2 PERFORMANCE. Sellers shall have duly performed or
complied with all of the covenants, acts and obligations to be performed or
complied with by them hereunder at or prior to the Closing.

8.3 SHARES. Sellers shall have delivered to Purchaser
certificates representing the shares, duly endorsed by Sellers for transfer to
Purchaser or accompanied by a separate assignment of the Shares to Purchaser
duly executed by Sellers.

8.4 CORPORATE BOOKS. Sellers shall have caused the
Company to deliver to Purchaser the corporate seal, corporate minute books and
stock transfer records of each member of the Dominick's Group.

8.5 PROOF OF GOOD STANDING. Sellers shall have caused
the Company to deliver to Purchaser a Certificate of Good Standing with respect
to each member of the Dominick's Group, dated within five (5) days prior to the
Closing Date, from the state of such member's incorporation and from each
additional state in which such member of the Dominick's Group is qualified to
do business as a foreign corporation.

8.6 CERTIFICATE OF SELLERS. Purchaser shall have
received a certificate signed by a manager of each of the Sellers and dated as
of the Closing Date certifying without qualification or exception that the
conditions set forth in Section 8.1 and Section 8.2 hereof have been fully
satisfied.

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8.7 OPINION OF COUNSEL. Purchaser shall have received
from Jenner & Block, counsel to Sellers and the Dominick's Group, an opinion of
such counsel, dated the Closing Date as to the matters set forth on EXHIBIT 8.7
hereto.

8.8 TITLE ASSURANCES. Sellers shall have delivered or
cause to be delivered to Purchaser a title policy or marked-up title commitment
for each parcel of the Owned Real Property, dated as of the Closing Date and in
the amounts reasonably determined by Purchaser, insuring title to each parcel
of the Owned Real Property, issued pursuant to and conforming with the title
insurance commitment specified in Section 5.4(b).

8.9 RESTRUCTURING TRANSACTIONS. Sellers shall have
delivered to Purchaser counterparts of the Asset Transfer Agreement duly
executed by all parties thereto, and the Restructuring Transactions shall have
been consummated in accordance with the Asset Transfer Agreement.

8.10 EXCLUDED PROPERTIES LEASES. Sellers shall have
delivered or caused to be delivered to Purchaser counterparts of each Excluded
Properties Lease, duly executed by the person or entity that holds legal title
to the Excluded Dominick's Property immediately following and after giving
effect to the consummation of the Restructuring Transactions.

8.11 STOCK REDEMPTION. The Stock Redemption shall have
been consummated in accordance with Section 5.10 and all further rights of
Dominick's Group employees with respect thereto (including any rights to
acquire additional stock appreciation rights) shall have been released and
discharged.

8.12 FINANCING. The Definitive Financing Agreements shall
be in full force and effect and the conditions for the receipt of the Financing
contemplated thereby shall have been satisfied or waived.

8.13 HSR ACT. The waiting periods under the HSR Act
applicable to the consummation of the Stock Purchase Transaction and other
transactions contemplated hereby, and any extensions thereof, shall have
expired or been terminated in accordance with the provisions thereof without
action by the Justice Department or the Federal Trade Commission to prevent or
condition consummation of this Agreement including, without limitation, any
condition that requires Purchaser to sell or dispose of any assets of
Purchaser, any member of the Dominick's Group or any of their Affiliates or to
hold separate pending such sale or disposition any particular assets or
categories of assets, businesses or voting securities of any of the foregoing
or the voting securities of any of their subsidiaries, or which prohibits or
restricts the ownership or operation by Purchaser or any of its Affiliates of
any portion of its business or assets.

8.14 REGULATORY CONSENTS, AUTHORIZATIONS, ETC. All
consents, authorizations, orders and approvals of, and filings and
registrations with, any governmental commission, board or other regulatory body
or any nongovernmental third party which are required for or in connection with
the execution and delivery of this Agreement and the Other Transaction
Documents, and the consummation by each party hereto of the transactions
contemplated hereby,

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<PAGE> 48
shall have been obtained or made, if the failure to make such filing or
registration or to obtain such consent, authorization, order or approval would
have a material adverse effect on Purchaser, or the Dominick's Group, or on
their respective abilities to conduct, after the Closing Date, their
businesses.

8.15 INJUNCTIONS. At the Closing there shall be no
judgment, decree, injunction, ruling or order of any court, governmental
department, commission, agency or instrumentality outstanding against any party
hereto which prohibits, restricts or delays consummation of the acquisition or
limits in any material respect the right of Purchaser to control the Dominick's
Group or any material aspect of the business of the Dominick's Group after the
Closing.

8.16 ENVIRONMENTAL REPORTS. Purchaser shall have received
the reports of the environmental inspections undertaken pursuant to Section
5.9, which shall be in form and substance reasonably satisfactory to Purchaser
and the Financing Sources and shall not have identified the presence, or
potential presence, of any Hazardous Materials with respect to the Real
Properties or the violation of any Environmental Laws or otherwise as
contemplated by Section 5.9 which require additional remediation or other
expenditures which are reasonably estimated to be in excess of an aggregate
amount of $20,000,000 in accordance with applicable Environmental Laws, unless
the Shareholders shall have agreed to accept responsibility for all such
remediation costs in excess of $20,000,000 as contemplated by Section 5.9.

8.17 FUNDED INDEBTEDNESS. Sellers shall have delivered to
Purchaser a certificate confirming the total amount of Funded Indebtedness of
the Dominick's Group on the Closing Date, before giving effect to the
Transactions, plus the total amount of outstanding letters of credit for which
any member of the Dominick's Group is contingently liable, does not exceed the
total amount of such Funded Indebtedness and letters of credit on the Balance
Sheet Date.

8.18 STOCK EXCHANGE TRANSACTIONS. The Stock Exchange
Transactions shall have been consummated in accordance with the terms of the
Stock Exchange Agreement.

8.19 FURTHER ASSURANCES. Sellers shall deliver to
Purchaser such other documents and instruments as may be reasonably required to
consummate the transactions contemplated by this Agreement.

ARTICLE IX

CONDITIONS TO OBLIGATION OF SELLERS TO CLOSE

The obligation of Sellers to proceed with the Closing is
subject to the satisfaction on or before the Closing Date of each of the
following conditions, unless waived in writing by Sellers:

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9.1 WARRANTIES. The warranties of Purchaser contained
herein shall be true and correct in all material respects on and as of the
Closing Date.

9.2 PERFORMANCE. Purchaser shall have duly performed or
complied with all of the covenants, acts and obligations to be performed or
complied with by Purchaser hereunder at or prior to the Closing.

9.3 CERTIFICATE OF OFFICER. Sellers shall have received
a certificate signed by the President of Purchaser and dated as of the Closing
Date certifying without qualification or exception that the conditions set
forth in Section 9.1 and Section 9.2 above have been fully satisfied.

9.4 OPINION OF COUNSEL. Sellers shall have received from
Latham & Watkins, counsel to Purchaser, an opinion of such counsel dated the
Closing Date, as to the matters set forth on Exhibit 9.4 hereto.

9.5 PURCHASE PRICE. Purchaser shall have delivered the
purchase price to Sellers in the manner provided for in Section 2.2 hereof.

9.6 RESTRUCTURING TRANSACTIONS. The Restructuring
Transactions shall have been consummated in accordance with the Asset Transfer
Agreement.

9.7 EXCLUDED PROPERTIES LEASES. Dominick's shall have
delivered to Sellers counterparts of each of the Excluded Properties Leases,
duly executed by an authorized officer of Dominick's.

9.8 STOCK REDEMPTION. The Stock Redemption shall have
been consummated in accordance with Section 5.10 and all further rights of
Dominick's Group employees with respect thereto shall have been released and
discharged.

9.9 HSR ACT. The waiting periods under the HSR Act
applicable to the consummation of the Stock Purchase Transaction and other
transactions contemplated hereby, and any extensions thereof, shall have
expired or been terminated in accordance with the provisions thereof without
action by the Justice Department or the Federal Trade Commission to prevent or
condition consummation of this Agreement, including, without limitation, any
condition that requires Purchaser to sell or dispose of any assets of Sellers,
the Dominick's Group or any of their Affiliates or to hold separate, pending
such sale or disposition, any particular assets or categories of assets,
businesses or voting securities of any of the foregoing or the voting
securities of any of their subsidiaries, or which prohibits or restricts the
ownership or operation by Sellers or any of its Affiliates of any portion of
its business or assets.

9.10 REGULATION CONSENTS, AUTHORIZATIONS, ETC. All
consents, authorizations, order and approvals of, and filings and registrations
with, any governmental commission, board or other regulatory body which are
required for or in connection with the execution and delivery of this
Agreement, and the consummation by the Shareholders of the Transactions, shall
have been obtained or made, if the failure to make such filing or registration
or to obtain such

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<PAGE> 50
consent, authorization, order or approval would have a material adverse effect
on Sellers or DDI or DPI, or on their respective abilities to conduct, after
the Closing Date, their businesses.

9.11 INJUNCTIONS. At the Closing Date there shall be no
judgment, decree, injunction, ruling or order of any court, governmental
department, commission, agency or instrumentality outstanding against any party
hereto which prohibits, restricts or delays consummation of the Stock Purchase
Transaction or any of the conditions to the consummation of the Stock Purchase
Transaction.

9.12 FURTHER ASSURANCES. Purchaser shall deliver to
Sellers such other documents and instruments as may be reasonably required to
consummate the transactions contemplated by this Agreement.

ARTICLE X

TERMINATION

10.1 TERMINATION RIGHTS. This Agreement may be terminated
and abandoned, without limiting or waiving any other rights and remedies any
party may have at law or in equity, at any time prior to the Closing under the
following circumstances:

(a) By Sellers or Purchaser in accordance with Sections
5.4 or 5.9, as applicable;

(b) By Shareholders or Purchaser, if (i) the conditions
to their respective obligations hereunder are not capable of
satisfaction or (ii) the transactions contemplated hereby shall not
have been consummated on or before April 30, 1995 but, in either case,
only if the failure of such condition or the failure to so consummate
the Agreement on or before such date did not result from the breach by
the party seeking termination (or any of its Affiliates) of any
representation or warranty made by it herein or the failure by the
party seeking termination (or any of its Affiliates) to fulfill any
covenant provided for herein that is required to be fulfilled by such
person (or its Affiliates) prior to Closing;

(c) By Purchaser, if the Shareholders are in material
breach of their obligations under this Agreement, or by the
Shareholders if the Purchaser is in material breach of its obligations
under this Agreement; provided that no party shall be entitled to
terminate this Agreement by reason of this clause (c) if it or any of
its Affiliates is in material breach of its obligations under this
Agreement; or

(d) By Sellers, if within 21 calendar days after the date
hereof (or if such date is not a business day, on the next business
day), Purchaser has failed to deliver to Sellers written confirmation
that each of the Financing Sources has waived its right under such
Commitment Letter to withdraw its commitment (or to materially
adversely modify such

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commitment) as a result of any matters disclosed or discovered in its
due diligence review of the Dominick's Group completed through such
date.

10.2 EFFECT OF TERMINATION. In the event this Agreement
is terminated pursuant to Section 10.1, all further obligations of the parties
hereunder shall terminate, except for the obligations set forth in Sections
6.2, 14.11, 14.15 and 14.16, and except that nothing in this Section 10.2 shall
relieve any party hereto of any liability for the breach of this Agreement.
The foregoing provisions shall not limit or restrict the availability of
specific performance or other injunctive relief to the extent that specific
performance or such other relief would otherwise be available to a party
hereunder.

ARTICLE XI

SURVIVAL AND INDEMNIFICATION

11.1 SURVIVAL. Each warranty contained in this Agreement
shall survive the Closing until and shall expire on the first anniversary of
the Closing Date, without regard to any investigation made by any party hereto,
except that (a) the warranties in Sections 3.1, 3.16 and 4.1 shall expire on
the third anniversary of the Closing Date; (b) the warranties in Sections 3.3,
3.4 and 4.3 shall continue without expiration; (c) the warranties in Section
3.20 shall expire thirty (30) days after the expiration of the Tax Survival
Period; and (d) the warranties in Section 3.23 shall expire thirty (30) days
after the expiration of the applicable statute of limitations. Notwithstanding
the preceding sentence, with respect to any claim asserted by a party for a
breach of any warranty of the other party if, and only if, the claim is
asserted by timely written notice given in the manner and with the specificity
required under Section 11.3, then the warranty with respect to which the claim
is asserted shall survive beyond the date determined by the preceding sentence,
but such survival shall extend only with respect to such claim and the specific
grounds and dollar amount asserted with respect thereto in such notice. All
covenants contained in this Agreement shall survive until performed.

11.2 INDEMNIFICATION BY SHAREHOLDERS. Effective from and
after the Closing, the Shareholders shall jointly and severally indemnify, hold
harmless, and by virtue hereof, release the Purchaser and any of its direct or
indirect subsidiaries and each of their respective directors, officers,
employees and agents, and each of the heirs, executors, successors and assigns
of any of the foregoing (collectively, the "PURCHASER INDEMNIFIED PARTIES"),
from and against any and all Covered Liabilities arising from (a) any Excluded
Liabilities, (b) any breach or violation of any representation or warranty of
the Shareholders contained herein, or (c) the imposition of any and all Taxes
for which any Shareholder is or may be liable as set forth in the Tax Matters
Agreement; provided, however, that (i) there shall be excluded from the
indemnity obligations described in the preceding clauses (a) through (c) any
Covered Liabilities which Purchaser has expressly agreed to assume or with
respect to which Purchaser has agreed to indemnify the Shareholders or any
Seller Indemnified Party pursuant to the provisions of this Agreement or which
any of Holdings, Purchaser or a member of the Dominick's Group or any of their
Affiliates has expressly agreed to assume or retain under the Tax Matters
Agreement or the Asset Transfer Agreement; and (ii) the Shareholders shall not
be obligated to make any

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indemnification payments under this Article XI or under any other provision of
this Agreement for the amount of any Covered Liability which any of the
Sellers, DDLLC and/or their Affiliates have previously paid to any of Holdings,
Purchaser or a member of the Dominick's Group or any of their Affiliates under
the Tax Matters Agreement or the Asset Transfer Agreement.

11.3 INDEMNIFICATION BY PURCHASER. Effective from and
after the Closing, the Purchaser and Holdings shall jointly and severally
indemnify, hold harmless, and by virtue hereof, release the Shareholders and
each of their respective members, managers, employees and agents, and each of
the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "SELLER INDEMNIFIED PARTIES"), from and against any and all
Covered Liabilities arising out of or in connection with or from (a) any breach
or violation of any representation or warranty of Purchaser or Holdings
contained herein, (b) any of the businesses, assets, operations or activities
of the Dominick's Group subsequent to the Closing Date other than the Excluded
Liabilities, or as otherwise expressly provided in this Agreement or the Other
Transaction Documents, or (c) the imposition of any and all Taxes for which
Purchaser, Holdings or any member of the Dominick's Group is or may be liable
as set forth in the Tax Matters Agreement.

11.4 INDEMNIFICATION PROCEDURES. If a claim by a third
party is made against a Purchaser Indemnified Party or a Seller Indemnified
Party (an "INDEMNIFIED PARTY"), and if such Indemnified Party intends to seek
indemnity with respect to under Section 11.2 or 11.3, such Indemnified Party
shall promptly give the indemnifying party (the "INDEMNIFYING PARTY") written
notice of the nature and amount of such claim. As part of such notice, the
Indemnified Party shall furnish the Indemnifying Party with copies of any
pleadings or correspondence relating thereto that either have been served upon
or delivered to the Indemnified Party or are otherwise in the Indemnified
Party's possession. The Indemnified Party's failure to promptly notify the
Indemnifying Party shall not release the Indemnifying Party, in whole or in
part, from its obligations to indemnify under this Article XI except to the
extent that the Indemnified Party's failure to so notify prejudices the
Indemnifying Party's ability to defend against such claim. At such time as the
Indemnifying Party acknowledges its liability (vis a vis the Indemnified Party)
under this Article XI with respect to such claim, then the Indemnifying Party
shall have the sole and exclusive right to defend against, settle or compromise
such claim; provided, that the Indemnifying Party shall proceed in good faith
with respect thereto; and provided further that the Indemnifying Party shall
not settle such claim for other than monetary consideration (unless the terms
of any such settlement do not constrain or otherwise affect the Indemnified
Party) without the consent of the Indemnified Party, which consent shall not be
unreasonably withheld; and provided further that if such claim is reasonably
likely to have a material adverse effect on the ongoing business or operations
of the Indemnified Party, the Indemnified Party may participate in the defense
of such claim at its own expense. If the Indemnifying Party does not
acknowledge to the Indemnified Party its liability (vis a vis the Indemnified
Party) hereunder prior to the earlier of (i) 15 days after the receipt of such
Indemnified Party's notice of a claim of indemnity hereunder, (ii) five days
prior to the deadline for filing any pleading in connection therewith, or
otherwise informs the Indemnified Party that it intends to proceed under a
reservation of its rights hereunder, the Indemnified Party shall have the right
to contest, settle or compromise the claim, but shall not thereby waive any
right to indemnity therefor pursuant to this Agreement and the Indemnifying
Party shall cooperate with

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the Indemnified Party in connection with defending against such claim; provided
that the Indemnifying Party shall have the right to participate, at its own
expense, in any such defense; and provided further, however, that the
Indemnified Party shall notify the Indemnifying Party of the terms of any
proposed settlement or compromise of any such claim prior to agreeing to the
same and afford the Indemnifying Party the opportunity to participate in the
settlement or assume the sole defense of such claims as provided in the fourth
sentence of this Section 11.4. The Indemnifying Party shall not, except with
the consent of the Indemnified Party, enter into any settlement that does not
include as an unconditional term thereof the giving by the person or persons
asserting such claim to the Indemnified Parties of an unconditional release
from all liability with respect to such claim or consent to entry of any
judgment.

11.5 NO RIGHT OF CONTRIBUTION. After the Closing, no
member of the Dominick's Group shall have any liability to indemnify the
Shareholders on account of the breach of any representation or warranty or the
nonfulfillment of any covenant or agreement of the Shareholders; and the
Shareholders shall have no right of contribution against any member of the
Dominick's Group. In addition to any other remedy which may be available at
law or in equity, the Purchaser shall be entitled to specific performance and
injunctive relief without posting bond or other security.

11.6 NATURE OF PAYMENTS. Amounts paid for indemnification
under this Agreement shall be adjustments to the purchase price for the Shares.

11.7 LIMITATIONS ON INDEMNIFICATION OBLIGATIONS. The
indemnification obligations under this Article XI (other than those referred to
in Sections 11.2(a), 11.2(c) and 11.3(c) shall not apply to any Covered
Liability being indemnified hereunder until the aggregate of all such Covered
Liabilities incurred by any Indemnified Party shall exceed $10,000,000.
However, in the event that the Covered Liabilities incurred by any Indemnified
Party do exceed $10,000,000, such Indemnified Party shall be entitled to
recover the full amount of the all Covered Liabilities it has incurred
(including those Covered Liabilities below $10,000,000) in excess of $5,000,000
from the Indemnifying Party. In no event shall such indemnification
obligations of the Shareholders (other than those referred to in clauses (a)
and (c) of Section 11.2) exceed, in the aggregate, $75,000,000.

11.8 PAYMENT OF INDEMNIFICATION OBLIGATIONS AND RIGHT OF
OFFSET. To the extent that any party incurs any expense or makes any payment
for which such party would be entitled to indemnification under this Article
XI, or otherwise has any claim for damages liquidated in amount for which such
party would be entitled to indemnification under this Article XI, in addition
to any other actions or remedies it may have in law or in equity, if the
Indemnifying Party does not pay the full amount of such indemnification
obligation to the Indemnified Party in immediately available funds within 15
days following written demand therefor by the Indemnifying Party, the
Indemnified Party may exercise a right of offset against any cash amounts then
payable or owing to the Indemnifying Party. Notwithstanding the foregoing, a
Purchaser Indemnified Party may only exercise such offset right against any
Shareholder Lease, if, and only so long as, (a) the Liquid Net Worth of Dodi
(as defined under Section 12.2 hereof) is less than $25 million, or (b) such
Purchaser Indemnified Party's claim for indemnification under this Article XI
is a liquidated claim against DDLLC which has not

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<PAGE> 54
been fully paid or satisfied (and then only to the extent of such unpaid
liquidated claim); provided, however, that in either such event no offset may
be made against any cash payments payable or owing by any Purchaser Indemnified
Party under (y) the Shareholder Lease for Store No. 62 (Northfield), or (z)
any Shareholder Lease for Shareholder Property from and after the date on which
(i) the fee simple interest in such Shareholder Property is transferred in a
bona fide transaction to a party which is not an Affiliate of any Shareholder,
or (ii) the mortgage debt encumbering the fee simple interest in such
Shareholder Property as of the Closing Date is refinanced, or (iii) the
unencumbered interest in the fee simple interest in such Shareholder Property
is encumbered with mortgage financing; and provided further, that the
limitations set forth in the immediately preceding clause (z) shall only apply
so long as, and to the extent that, the aggregate amount of all annual rental
payments due from Purchaser and/or its Affiliates (including the members of
Dominick's Group) under all Shareholder Leases (other than the those for Store
No. 62 and for Shareholder Property which has been transferred in bona fide
transactions to parties unrelated to the Shareholders or their Affiliates)
equals or exceeds $5 million. Further notwithstanding the foregoing: (a)
Purchaser shall not be entitled to any right of offset against any Shareholder
Lease at any time after the later of the dates specified in clauses (a) and (b)
of the second sentence of Section 12.2; and (b) Purchaser shall not be entitled
to any right of offset against any payments due with respect to the Holdings
Preferred Stock after such time as such Holdings Preferred Stock shall have
been transferred in a bona fide transaction to a party which is not an
Affiliate of any Shareholder.

ARTICLE XII

SHAREHOLDERS' RESPONSIBILITY; POST CLOSING
DISTRIBUTIONS BY SHAREHOLDERS

12.1 JOINT AND SEVERAL. The obligations of Shareholders
under this Agreement shall be joint and several.

12.2 NET WORTH COVENANT. Dodi warrants that upon
consummation of the Stock Purchase Transaction its aggregate net worth
("AGGREGATE NET WORTH") and Liquid Net Worth (as defined below), both
determined in accordance with generally accepted accounting principles, shall
exceed $75 million and $25 million, respectively. Until the later of (a) the
third anniversary of the Closing Date, or (b) in the event any claim by
Purchaser for indemnification under Article XI remains unresolved and
outstanding on such third anniversary, the date on which such claim or claims
are satisfied, resolved, withdrawn or otherwise settled or discharged, Dodi
shall not make any distribution of its assets to or on behalf of its members
that would cause its Aggregate Net Worth to be less than $75 million or its
Liquid Net Worth to be less than $25 million. As used herein the term "LIQUID
NET WORTH" shall mean that portion of the assets comprising Dodi's Aggregate
Net Worth which consists of cash, cash equivalents and/or marketable
securities.

12.3 DISTRIBUTIONS. Notwithstanding the provisions of
Section 12.2 above, from and after the end of the 18th month following the
Closing Date, Dodi may make distributions to its members which reduce its
Aggregate Net Worth below $75 million if (i) Dodi notifies

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Purchaser in writing of the proposed distribution and the amount thereof at
least sixty (60) days prior to such distribution (the "DISTRIBUTION NOTICE"),
and (ii) each member in respect of whom such distribution is proposed to be
made enters into a written agreement with Purchaser prior to such distribution
agreeing to be personally liable for any indemnification payments subsequently
determined to be due Purchaser under Article XI hereof up to an amount equal to
the net value of the proposed distribution to such member (the "DISTRIBUTION
VALUE"), and to maintain a net worth at least equal to such Distribution Value
until the later to occur of the events specified in clauses (a) and (b) of the
second sentence of this Section 12.2, as determined as follows:

(a) CASH. The Distribution Value of cash or cash
equivalents shall be the total amount of such cash or cash equivalents.

(b) PROPERTY. The Distribution Value of property other
than cash or cash equivalents ("DISTRIBUTION PROPERTY") shall be the
"fair market value" of the Distribution Property determined as
follows.

(i) The fair market value of Distribution
Property shall be the amount agreed to by the Purchaser and
the member to whom or in respect of whom the subject
distribution is proposed to be made within five (5) days after
Purchaser's receipt of the Distribution Notice.

(ii) If the Purchaser and such member cannot agree
on the fair market value of the Distribution Property within
such 5-day period, then the fair market value shall be
determined by appraisal of three independent appraisers,
selected within ten (10) days after the end of the aforesaid
5-day period, one selected by Dodi, one selected by Purchaser
and the third selected by the two appraisers so selected. The
appraisers shall be directed to determine the fair market
value of the Distribution Property by mutual agreement within
ten (10) days after their selection. For purposes hereof, the
appraisers shall be deemed to "agree" if the individual
determinations of at least two of the appraisers do not vary
from each other by more than five percent (5%) of the lower or
lowest of such determinations, in which event the fair market
value of the Distribution Property shall be the average of the
individual determinations of those two or three appraisers.

(iii) If the appraisers do not agree and are not
deemed to "agree" on the fair market value of the Distribution
Property, such fair market value shall be the average of the
determinations by the three appraisers. The determination of
the appraisers shall be final and binding on the parties. The
fees of the first two appraisers shall be paid by the
appointing party or parties and the fees of the third
appraiser shall be divided equally between the Purchaser and
Dodi.

Notwithstanding the foregoing provisions, however, Dodi shall maintain a Net
Worth of at least $35 million until the later of (a) December 31, 1999, or (b)
in the event any claim by Purchaser for indemnification under Article XI for a
breach of the warranties in Section 3.20 remains

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<PAGE> 56
unresolved, and outstanding as of December 31, 1999, the date on which such
claims are satisfied, resolved, withdrawn, or otherwise settled or discharged.
Dodi agrees to deliver to Purchaser an annual certificate or other confirmation
of its independent auditors, and, from time to time at the request of
Purchaser, but not more frequently than once each calendar quarter, a
certificate of a manager or other authorized agent or employees of Dodi,
confirming its compliance with the Aggregate Net Worth and Liquid Net Worth
requirements as set forth herein. Purchaser shall be entitled to the remedy of
specific performance with respect to the obligations of Dodi under this Article
XII.

ARTICLE XIII

POST CLOSING COVENANTS

13.1 TAX MATTERS AGREEMENT. On the Closing Date
concurrently with the Closing, Holdings and Purchaser shall, and shall cause
Purchaser Sub and the members of the Dominick's Group to, execute and deliver
the Tax Matters Agreement, and Shareholders shall, and shall cause DDI and DPI
to, execute and deliver the Tax Matters Agreement.

13.2 COMPANY NAME CHANGE. Sellers shall retain the rights
to use the name "Dodi" and, to effect the foregoing, promptly after the
Closing, the Purchaser shall cause the Company to change its name to a name
that does not include, or is not confusingly similar to, the word "Dodi".
Notwithstanding the foregoing, Dodi Hazelcrest, Inc. may retain and use the
name "Dodi Hazelcrest, Inc." for all commercial purposes for which such name is
currently used. Upon or before the cessation of such purposes, Purchaser shall
cause Dodi Hazelcrest, Inc. to take all actions as are necessary to change the
name of "Dodi Hazelcrest, Inc." to a name which does not include the word
"Dodi".

13.3 COVENANT NOT TO COMPETE. Sellers acknowledge and
agree that the business of the Dominick's Group is conducted primarily in the
State of Illinois and that its reputation and goodwill are an integral part of
its business success throughout the areas where it conducts its business. If
Sellers deprive Purchaser of any of Dominick's goodwill or in any manner
utilize its reputation and goodwill in competition with Dominick's, Purchaser
will be deprived of the benefits it has bargained for pursuant to this
Agreement. Although the parties hereto place no monetary value upon this
covenant not to compete, this covenant is necessary to transfer the business
and goodwill of Dominick's to Purchaser effectively. Accordingly, as an
inducement for Purchaser to enter into this Agreement, Sellers agree that for a
period of five years after the Closing, Sellers shall not, and shall not permit
any of their Affiliates, without Purchaser's prior written consent, directly or
indirectly, own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or be connected as a director,
officer, employee, partner, consultant or otherwise with, any profit or
non-profit business or organization in the six-county area surrounding the City
of Chicago or otherwise within five miles of any store operated by Dominick's
and its Subsidiaries, which, directly or indirectly, competes with the business
of Dominick's. Sellers agree to maintain in confidence, and not to disclose to
any third party, any ideas, methods, developments, inventions, improvements and
business plans and information which are the confidential information of
Dominick's. In the

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event the agreement in this Section 13.3 shall be determined by any court of
competent jurisdiction to be unenforceable by reason of its extending for too
great a period of time or over too great a geographical area or by reason of
its being too extensive in any other respect, it shall be interpreted to extend
only over the maximum period of time for which it may be enforceable, and/or
over the maximum geographical area as to which it may be enforceable and/or to
the maximum extent in all other respects as to which it may be enforceable, all
as determined by such court in such action.

Sellers acknowledge that a breach of the covenants contained
in this Section 13.3 will cause irreparable damage to Purchaser and the
Company, the exact amount of which will be difficult to ascertain, and that the
remedies at law for any such breach will be inadequate. Accordingly, Sellers
agree that if Sellers breach the covenant contained in this Section 13.3, in
addition to any other remedy which may be available at law or in equity,
Purchaser or Dominick's shall be entitled to specific performance and
injunctive relief, without posting bond or other security. Sellers shall cause
James S. DiMatteo to agree to be bound by the provisions of this Section 13.3
on or prior to the Closing Date.

ARTICLE XIV

MISCELLANEOUS

14.1 ENTIRE AGREEMENT. This Agreement sets forth the
entire understanding and supersedes all prior and contemporaneous oral or
written agreements among the parties hereto relating to the subject matter
contained herein, and merges all prior and contemporaneous discussions among
them. No party hereto shall be bound by any definition, condition, warranty,
covenant or provision other than as expressly stated in this Agreement or as
hereafter set forth in a written instrument executed by such party or by a duly
authorized representative of such party.

14.2 SEVERABILITY. The parties hereto expressly agree
that it is not the intention of any party hereto to violate any public policy,
statutory or common laws rules, regulations, treaties or decisions of any
government or agency thereof. If any provision of this Agreement is judicially
or administratively interpreted or construed as being in violation of any such
provision as applied to any fact or circumstance, such articles, sections,
sentences, words, clauses or combinations thereof shall be modified to the
minimum extent necessary to render it valid, and it shall not affect any other
provision of this Agreement or the same provisions applied to any other fact or
circumstance, and the remainder of this Agreement shall remain binding upon the
parties hereto.

14.3 NOTICES. Any and all notices and other
communications necessary or desirable to be served hereunder shall be either
(a) personally delivered, or (b) sent by either (i) telecopy, (ii) prepaid
same-day or overnight delivery service, proof of delivery requested, or (iii)
United States certified or registered mail, postage prepaid, return receipt
requested, addressed as follows:

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(a) If to Shareholders:

c/o James S. DiMatteo
450 E. Devon
Itasca, Illinois 60143
Telecopier No.: (708) 773-0171

With a copy to:

Jenner & Block
One IBM Plaza
Chicago, Illinois 60611
Attention: Bruce G. Wilson, Esq.
Telecopier No. (312) 527-0484

(b) If to Purchaser or Holdings:

c/o The Yucaipa Companies
10000 Santa Monica Boulevard, Fifth Floor
Los Angeles, California 90067
Attention: Mark A. Resnik, Esq.
Telecopier No.: (310) 789-7201

With a copy to:

Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Thomas C. Sadler, Esq
Telecopier No.: (213) 891-8763

or to such other address, addresses or telecopier number as either party hereto
may designate or itself from time to time in a written notice served upon the
other party hereto in accordance herewith. Any notice sent as hereinabove
provided shall be deemed delivered upon receipt or refusal of delivery, except
in the case of certified or registered United States mail which shall be deemed
delivered on the third (3rd) business day next following the postmark date
which it bears.

14.4 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, and each counterpart shall constitute an original
instrument, but all such separate counterparts shall constitute one and the
same agreement.

14.5 GOVERNING LAW AND VENUE. The validity, construction
and enforceability of this Agreement shall be governed in all respects by the
laws of the State of Illinois without regard to its conflict of laws rules.
Any action brought in connection with this Agreement shall be brought before a
court of competent jurisdiction in Cook County, Illinois.

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14.6 SUCCESSORS AND ASSIGNS. Neither this Agreement, nor
any of the rights, duties ar obligations hereunder, may be assigned by
operation of law or otherwise by the parties hereto without the prior written
consent of all other parties hereto. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective permitted
successors and assigns.

14.7 FURTHER ASSURANCES. At any time on or after the
Closing, the parties hereto shall each perform such acts, execute and deliver
such instruments, assignments, endorsements and other documents and do all such
other things consistent with the terms of this Agreement as may be reasonably
necessary to accomplish the transactions contemplated by this Agreement or
otherwise to carry out the purpose of this Agreement.

14.8 GENDER, NUMBER AND HEADINGS. The masculine, feminine
or neuter pronouns used herein shall be interpreted without regard to gender,
and the use of the singular or plural shall be deemed to include the other
whenever the context so requires. The headings in this Agreement are inserted
for convenience or reference only and are not a part of this Agreement.

14.9 SCHEDULES. The Schedules referred to herein and
attached hereto are incorporated herein by such references as if fully set
forth in the text hereof.

14.10 WAIVER OF PROVISIONS. The terms, covenants, warranties
and conditions of this Agreement may be waived only by a written instrument
executed by the party waiving compliance. The failure of any party at any time
to require performance of any provision hereof shall in no manner, affect the
right at a later date to enforce the same. No waiver by any party of any
condition, or breach of any provision, term, covenant or warranty contained in
this Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be or construed as a further or continuing waiver of any
such condition or of the breach of any other provision, term, covenant or
warranty of this Agreement.

14.11 EXPENSES. The Company may pay, or may cause Dominick's
to pay the reasonable legal, accounting and other expenses incurred in
connection with the transactions contemplated by this Agreement. Except as
otherwise expressly provided herein, each party shall bear its own expenses
incident to this Agreement and the transactions contemplated by this Agreement,
including without limitation, all fees of counsel, accountants and consultants.

14.12 RECITALS. The recitals set forth above on the initial
page of this Agreement are incorporated herein by this reference, and this
Agreement shall be construed in light thereof.

14.13 KNOWLEDGE OF SELLERS. Except as otherwise expressly
set forth herein, for purposes of this Agreement the knowledge of Sellers or
the Shareholders shall mean only the actual (and not imputed) knowledge of (a)
members and managers of the Shareholders, and (b) any director or executive
officer of either the Company, Dominick's or any Subsidiary, following
reasonable inquiry. As used in this Agreement with respect to the knowledge of
the Shareholders or Sellers, the phrase "without inquiry of third parties"
shall mean that no inquiry is required to have been made of persons who are not
employees of the Dominick's Group.

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<PAGE> 60
14.14 NO THIRD PARTY BENEFICIARIES. This Agreement is made
solely for the benefit of the parties hereto and shall not give rise to any
rights of any kind to third parties except as expressly provided herein.

14.15 BROKER FEES. Except for the fees and expenses of
Goldman Sachs & Co. payable by Dominick's pursuant to the Goldman Letter
Agreement, each of the Sellers on the one hand, and Purchaser on the other
hand, hereby agrees to be solely responsible for and to indemnify and hold the
other harmless against and in respect of, any obligation or liability,
contingent or otherwise, for brokerage or finder's fees or agents commissions
or other like payment in connection with this Agreement or the transactions
contemplated hereby which are based in any way on agreements, arrangements or
understandings made or claimed to have been made by such party with any third
party.

14.16 PUBLIC ANNOUNCEMENTS. Holdings, Purchaser and the
Shareholders shall not, and shall cause their Affiliates not to, make, issue or
release any public announcement, press release, statement or acknowledgement of
the existence of, or reveal publicly the terms or conditions and/or status of
the transactions provided for herein, without the prior consent of the ether
party as to the content and time of release of and the media in which such
statement or announcement is to be made. Each party hereto agrees that it will
not unreasonably withhold Dr delay any such consent.

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first written above.

DFF HOLDINGS, INC.

By /s/ Ronald W. Burkle
------------------------------
Its Chief Executive Officer

DFF ACQUISITION SUB, INC.

By /s/ Ronald W. Burkle
------------------------------
Its Chief Executive Officer

DODI L.L.C.

By /s/ James S. DiMatteo
------------------------------
James S. DiMatteo, Manager

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<PAGE> 61
DODI FAMILY L.L.C.

By /s/ James S. DiMatteo
------------------------------
James S. DiMatteo, Manager

DODI DEVELOPMENTS, L.L.C.

By /s/ James S. DiMatteo
------------------------------
James S. DiMatteo, Manager

<PAGE> 1

Exhibit 10.3

TAX MATTERS AGREEMENT

THIS TAX MATTERS AGREEMENT is made as of March 22, 1995, by
and among Dominick's Supermarkets, Inc., a Delaware corporation formerly known
as DFF Holdings, Inc. ("HOLDINGS"), DFF Acquisition Sub, Inc., a Delaware
corporation and a wholly-owned subsidiary of Holdings ("PURCHASER"), DFF
Acquisition Sub Two, Inc., a Delaware corporation and a wholly-owned subsidiary
of Purchaser ("PURCHASER SUB" and, together with Holdings, and Purchaser, the
"PURCHASER PARTIES"), Dodi L.L.C., a limited liability company organized under
the laws of the State of Illinois ("DODI"), Dodi Family L.L.C., a limited
liability company organized under the laws of the State of Illinois ("DFLLC"),
Dodi Developments L.L.C., a limited liability company organized under the laws
of the State of Illinois ("DDLLC"), Dodi, Inc., a Delaware corporation (the
"COMPANY"), Dodi Developments, Inc., a Delaware corporation ("DDI"), Dodi
Properties, Inc., a Delaware corporation ("DPI"), Dominick's Finer Foods, Inc.,
a Delaware corporation ("DOMINICK'S"), Dominick's Finer Foods, Inc. of
Illinois, an Illinois corporation ("DOMINICK'S-ILLINOIS"), Dodi Hazelcrest,
Inc., a Delaware corporation ("DODI HAZELCREST"), Kohl's of Bloomingdale, Inc.,
an Illinois corporation ("KOHL'S"), Jerry's Deep Discount Centers, Inc., an
Illinois corporation ("JERRY'S"), and Save-It Discount Foods Corporation, an
Illinois corporation ("SAVE-IT").

INTRODUCTION

Prior to the date hereof, the Company was owned by Dodi, DFLLC
and DDLLC (the "SHAREHOLDERS"). Pursuant to the Stock Purchase Agreement dated
as of January 17, 1995 (as amended and supplemented by the Closing Agreement
dated as of March 21, 1995, the "PURCHASE AGREEMENT"), the Purchaser Parties
are, on the date hereof, acquiring, directly and indirectly, all of the
outstanding shares of capital stock of the Company (the "STOCK PURCHASE
TRANSACTION"). Immediately following the consummation of the Stock Purchase
Transaction (a) Purchaser will merge with and into the Company, with the
Company being the surviving corporation, and (b) Purchaser Sub will merge with
and into Dominick's with Dominick's being the surviving corporation (the
"MERGERS"). The parties to this Agreement desire to set forth their agreements
in relation to responsibility for the preparation and filing of tax returns,
responsibility for taxes, interest, and penalties that are or may be owed by or
with respect to, or asserted against, the parties and their rights and
obligations with respect to audits and proceedings that may affect the taxes,
interest, and penalties that may be asserted against the parties.

AGREEMENT

For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

1. DEFINED TERMS. Capitalized terms not defined elsewhere in
this Agreement shall have the following meanings:

1.1 "ASSET TRANSFER AGREEMENT" shall mean that certain
Asset Transfer Agreement entered into by and among DDLLC, the Company,
Dominick's, DDI, DPI, Dodi,
<PAGE> 2
DFLLC, Dodi Broadway L.L.C., and Dodi Northfield L.L.C. pursuant to which the
Restructuring Transactions were consummated on the business day immediately
preceding the date hereof.

1.2 "CLOSING DATE TAXES" shall mean all Taxes assessed
against, incurred by or attributable to the Consolidated Group with respect to
any transactions or events caused by any of the Purchaser Parties or the
Consolidated Group which occur on the Closing Date, including, without
limitation, all Stock Purchase Taxes.

1.3 "CODE" shall mean the Internal Revenue Code of 1986,
as amended, or any successor revenue law of the United States of America.

1.4 "CONSOLIDATED GROUP" shall mean the affiliate group
(as defined in Section 1504 of the Code) including the Company and the
Subsidiaries, DDI and DPI.

1.5 "DISAFFILIATION DATE" shall mean the date of this
Agreement.

1.6 "FEDERAL INCOME TAX" shall mean any tax imposed by
Subtitle A of the Code and any interest and penalties related thereto.

1.7 "FINAL FULL PERIOD" shall mean the Period commencing
October 30, 1993 and ending October 29, 1994.

1.8 "INCOME TAX" shall mean any Federal Income Tax and
any State Income Tax.

1.9 "INCOME TAX BENEFIT" shall have the meaning set
forth in Section 11 hereof.

1.10 "IRS" shall mean the United States Internal Revenue
Service.

1.11 "NEW PERIODS" shall mean Periods beginning after the
Disaffiliation Date.

1.12 "OLD PERIODS" shall mean Periods ending on or before
the Disaffiliation Date.

1.13 "OTHER TAX" shall mean all taxes, charges, tees,
levies, interest, penalties, or other assessments imposed by any federal,
state, or local taxing authority in the United States or any foreign taxing
authority (including, but not limited to income, property, gross receipts,
sales, use, service, ad valorem, transfer, franchise, profits, license, lease,
withholding, payroll, employment, excise, severance, stamp, occupation,
windfall, social security, or other taxes or charges of any kind whatsoever,
and any interest or any penalties, additions to tax or additional amounts
related thereto) other than any Federal Income Tax or any State Income Tax.

2
<PAGE> 3
1.14 "PERIOD" means the period of time under applicable
law for which a Tax is imposed.

1.15 "RESTRUCTURING TRANSACTIONS" shall mean the
transactions defined as the restructuring Transactions in the Purchase
Agreement.

1.16 "RETURN" shall mean any return, report, declaration,
statement, or other document required to be filed with any applicable taxing
authority for any Tax with respect to a Period or portion thereof.

1.17 "RESTRICTED STOCK" shall mean the 8,600 shares of
Dominick's common stock not owned by the Company immediately prior to the
consummation of the Stock Redemption.

1.18 "SAR" shall mean the stock appreciation rights
relating to the common stock of Dominick's.

1.19 "SHORT PERIOD" shall mean the Period commencing
October 30, 1994 and ending in the Disaffiliation Date.

1.20 "STATE INCOME TAX" shall mean any tax imposed by the
Illinois Income Tax Act or the corresponding provisions of the laws of the
State of Indiana and any interest and penalties related thereto.

1.21 "STOCK PURCHASE TAXES" shall mean any Taxes that are
assessed against, incurred by or attributable to the Consolidated Group by
reason of, or resulting from, the Stock Purchase Transaction, the Mergers, or
any elections made by any of the Purchaser Parties or the Consolidated Group
with respect therefor.

1.22 "STOCK REDEMPTION" shall mean the transactions
defined as the Stock Redemption in the Purchase Agreement.

1.23 "STOCK REDEMPTION TAX BENEFIT" shall mean any Income
Tax Benefit realized by the Company and/or the Subsidiaries as a result of the
Stock Redemption, determined, however, as if each and every SAR and share of
Restricted Stock is actually purchased, redeemed, or otherwise discharged and
satisfied for a secured promissory note given by Dominick's on the business day
immediately preceding the consummation of the Stock Purchase Transaction, and
not exchanged by the holder thereof for any new stock appreciation right, share
of restricted stock, option or other similar instrument or security of the
Company, any Subsidiary or any of the Purchaser Parties or their affiliates.

1.24 "SUBSIDIARIES" shall mean Dominick's,
Dominick's-Illinois, Dodi Hazelcrest, Kohl's, Jerry's, and Save-It.

1.25 "TAX" shall mean any Federal Income Tax, State
Income Tax, or Other Tax.

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1.26 "TRANSFER TRANSACTIONS TAXES" shall mean an amount
equal to (a) the additional Income Taxes that are assessed against, incurred by
or attributable to the Company and Dominick's by reason of the inclusion in the
Company's consolidated Federal Income Tax Return and combined State Income Tax
Return for the Period including the Short Period of the taxable gain, if any,
recognized as a result of the Restructuring Transactions, as determined under
the provisions of Section 311 of the Code only and no other provisions of the
Code, and as determined under the analogous provisions of the Illinois Income
Tax Act only and no other provisions of the Illinois Income Tax Act, net of any
Stock Redemption Tax Benefit, and (b) all Other Taxes assessed against or
attributable to the Consolidated Group which are incurred by the Consolidated
Group as a result of the Restructuring Transactions.

2. TERMINATION OF PRIOR TAX SHARING ARRANGEMENTS.

As of the Disaffiliation Date, all tax sharing agreements
previously in effect among any two or more members of the Consolidated Group
shall be terminated.

3. LIABILITY FOR TAXES.

3.1 DDI AND DPI. Except as otherwise provided herein,
the Shareholders, jointly and severally, shall be liable for, and shall
indemnify and hold the Consolidated Group harmless from and against any Tax
assessed against or attributable to DDI and/or DPI or other loss or expense
(including reasonable attorneys' and accountants' fees) incurred by the
Consolidated Group resulting from or relating to any Tax attributable to DDI
and/or DPI with respect to any Old Period (including, without limitation, any
Tax resulting from any deferred intercompany transaction that has occurred in
any such Old Period).

3.2 TRANSFER TRANSACTIONS TAXES. The shareholders,
jointly and severally, shall be responsible for and shall indemnify and hold
the Consolidated Group harmless from and against all Transfer Transactions
Taxes.

3.3 PURCHASER PARTIES AND CONSOLIDATED GROUP. The
Purchaser Parties and the Consolidated Group, jointly and severally, shall be
responsible and liable for all Closing Date Taxes. The Purchaser Parties and
the Consolidated Group, jointly and severally, shall indemnify and hold each of
the Shareholders (and their successors and assigns) harmless from and against
all Closing Date Taxes assessed against, incurred by or attributable to the
Shareholders (or their successors and assigns).

3.4 INCOME TAX ALLOCATION. The allocable liability for
Income Taxes for the Short Period shall be based upon the items of income,
deduction, loss, and credit of DDI and DPI for the Short Period based upon a
closing of the books on the Disaffiliation Date, with the benefit of any exempt
amount, standard deduction, progressive rate, or other calculation for a full
taxable year prorated based upon the number of days during the Short Period
over 365. Income, deductions, and credits of DDI and DPI shall be allocated
between the Short Period and any New Period in a manner consistent with the
methods used by the Consolidated Group in prior Periods. If the portion of any
item of income, deduction, or credit attributable to DDI or DPI and to be
reported on an Income Tax Return as attributable to the Short Period, and the

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<PAGE> 5
portion to be included in Income Tax Returns as attributable to New Periods
cannot be clearly determined from the accounting records, the item of income,
deduction, or credit shall be allocated pursuant to United States Treasury
Regulations Section 1.1502-76(b) relating to consolidated returns.

3.5 OTHER ALLOCATION. For purposes of computing the
actual liability for Other Taxes imposed with respect to transactions other
than the Restructuring Transactions, such Other Taxes shall be deemed to relate
to the day on which the transaction resulting in such Other Taxes takes place.
Except as otherwise provided herein with respect to the Restructuring
Transactions, the actual liability for all Other Taxes for the Short Period
shall be prorated based upon the number of days in the Short Period over 365;
provided, however, that to the extent that the proration or allocation of any
such Other Taxes is expressly provided for under the terms of the Asset
Transfer Agreement, such Other Taxes shall be prorated or allocated in
accordance with the terms of the Asset Transfer Agreement, anything herein to
the contrary notwithstanding.

3.6 NATURE OF INDEMNIFICATION PAYMENTS. Amounts paid
for indemnification under this Agreement shall be adjustments to the purchase
price for the shares of stock purchased by the Purchaser Parties pursuant to
the Purchase Agreement.

3.7 EFFECT OF INDEMNIFICATION PAYMENTS UNDER PURCHASE
AGREEMENT. Anything herein to the contrary notwithstanding, no party hereto
shall be obligated to make any indemnification payment hereunder to the extent
that the party claiming such indemnification (or its affiliates) has received
an indemnification payment under the Purchase Agreement in respect of the Taxes
for which indemnification hereunder is being sought.

4. FEDERAL AND STATE INCOME TAX RETURNS AND PAYMENTS.

4.1 Preparation of Returns. Subject to the terms and
conditions set forth below, the income, deductions and credits attributable to
DDI and DPI for the Final Full Period shall be included in the consolidated
Federal Income Tax Return and the combined State Income Tax Return of the
Consolidated Group for the fiscal year ended October 29, 1994, and the income,
deductions, and credits attributable to DDI and DPI for the Short Period
(including any deferred income taken into income by the Company under United
States Treasury Regulations Section 1.1502-13 and Section 1.1502-14 and any
excess loss accounts taken into income under former United States Treasury
Regulation Section 1.1502-19) shall be included in the consolidated Federal
Income Tax Return and combined State Income Tax Return of the Consolidated
Group for the fiscal year which includes the Short Period. Such income,
deductions and credits attributable to DDI and DPI shall be determined from
hypothetical Income Tax Returns prepared by the Shareholders and delivered to
the Company on or before May 15, 1995, in the case of income, deductions and
credits attributable to DDI and DPI for the Final Full Period, and on or before
January 15, 1996, in the case of income, deductions and credits attributable to
DDI and DPI for the Short Period; provided, however, that the Company shall
have the right to review such hypothetical Income Tax Returns (and all related
workpapers) prior to their incorporation into the relevant consolidated Federal
Income Tax Returns and combined State Income Tax Returns, and shall notify the
Shareholders of any disagreement with the information reported in any such
hypothetical Income Tax Returns, whereupon the Company and the Shareholders
shall use their

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<PAGE> 6
best efforts promptly to resolve any such disagreement; and further provided,
however, that in the event the Shareholders provide the Company with a legal
opinion from a nationally recognized law firm stating that there is substantial
authority in support of the information and return positions reflected in such
hypothetical Income Tax Returns, such information and return positions shall be
incorporated in the Company's consolidated Federal Income Tax Returns and
Combined State Income Tax Returns. The hypothetical Income Tax Returns
including the income, deductions and credits attributable to DDI and DPI shall
be prepared (a) in the same manner and using the same principles and procedures
as have been used by DDI and DPI in prior years during which they were members
of the Consolidated Group, and (b) utilizing proper accounting rules for the
preparation of Income Tax Returns, as though DDI and DPI were filing such
Returns separate and apart from the Consolidated Group.

4.2 FINAL FULL PERIOD TAXES. On or before
July 15, 1995:

(a) DDLLC shall pay to the Company the amount, if
any, by which (i) the total amount of Income Taxes that would be due
if the hypothetical Income Tax Returns prepared by the Shareholders
for the Final Full Period in accordance with Section 4.1 hereof were
filed separately on or before July 15, 1995, exceeds (ii) the total
amount of all previous payments made by or on behalf of or
attributable to DDI and/or DPI, as the case may be, with respect to
Income Taxes for the Final Full period.

(b) The Company shall pay DDLLC the amount, if
any, by which (i) the total amount of all previous payments made by or
on behalf of or attributable to DDI and/or DPI, as the case may be,
with respect to Income Taxes for the Final Full Period, exceeds (ii)
the total amount of Income Taxes that would be due if the hypothetical
Income Tax Returns prepared by the Shareholders for the Final Full
Period in accordance with Section 4.1 hereof were filed separately on
or before July 15, 1995.

(c) In the case where the hypothetical Income Tax
Returns prepared by the Shareholders for the Final Full Period in
accordance with Section 4.1 hereof show a net loss, the Company shall
pay to DDLLC an amount equal to the sum of (i) the Income Tax Benefit
realized by the Consolidated Group attributable to such net loss, plus
(ii) the total amount of all previous payments made by or on behalf of
or attributable to DDI and/or DPI, as the case may be, with respect to
Income Taxes for the Final Full Period.

(d) The Company shall have the responsibility for
timely filing of the Consolidated Federal Income Tax Return and
combined State Income Tax Return for the Consolidated Group for the
Final Full Period and the timely remittance of all Income Taxes due
with respect to the income, deductions and credits of the Consolidated
Group during the Final Full Period.

4.3 SHORT PERIOD TAXES. On or before the date on which
such Tax is due to be paid by the Consolidated Group:

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<PAGE> 7
(a) DDLLC shall pay the Company the amount, if
any, by which (i) the total amount of Income Taxes (other than any
Closing Date Taxes) that would be due if the hypothetical Income Tax
Returns prepared by the Shareholders for the Short Period in
accordance with Section 4.1 hereof were filed separately on or before
the date when it is due, exceed (ii) the total amount of all previous
payments made by or on behalf of or attributable to DDI and/or DPI, as
the case may be, with respect to Income Taxes for the Short Period.

(b) The Company shall pay DDLLC the amount, if
any, by which (i) the total amount of all previous payments made by or
on behalf of or attributable to DDI and/or DPI, as the case may be,
with respect to Income Taxes for the Short Period, exceeds (ii) the
total amount of Income Taxes (other than any Closing Date Taxes) hat
would be due if the hypothetical Income Tax Returns prepared by it for
the Short Period in accordance with Section 4.1 hereof were filed
separately on or before the late when it is due.

(c) In the case where the hypothetical Income Tax
Returns prepared by the Shareholders for the Short Period in
accordance with Section 4.1 hereof show a net loss, the Company shall
pay to DDLLC an amount equal to the sum of (i) the Income Tax Benefit
realized by the Consolidated Group attributable to such net loss, plus
(ii) the total amount of all previous payments made by or on behalf of
or attributable to DDI and/or DPI, as the case may be, with respect to
Income Taxes for the Short Period.

(d) The Company shall have the responsibility for
timely filing of the consolidated Federal Income Tax Return and
combined State Income Tax Return for the Consolidated Group for the
Short Period and the timely remittance of all Income Taxes due with
respect to the income, deductions and credits of the Consolidated
Group during the Short Period.

4.4 RESTRUCTURING TRANSACTIONS; STOCK REDEMPTION AND
TRANSFER TRANSACTION TAXES. Subject to the terms and conditions set forth
below, the income, deductions, and credits of the Consolidated Group
attributable to the Restructuring Transactions and the income, deductions and
credits of the Consolidated Group attributable to the Stock Redemption shall be
included in the consolidated Federal Income Tax Return and the combined State
Income Tax Return of the Consolidated Group for the Period including the Short
Period. On or before the date on which such Tax is due to be paid by the
Company, the Shareholders shall pay to the Company an amount equal to the
Transfer Transactions Taxes less the total amount of any previous payments made
by or attributable to the Shareholders with respect to the Transfer
Transactions Taxes. The amount of the Transfer Transactions Taxes shall be
determined from hypothetical Income Tax Returns of the Company, DDI, DPI and
Dominick's, prepared by the Shareholders and delivered to the Company on or
before January 15, 1996 and the information and return positions reflected in
such hypothetical Income Tax Returns shall be incorporated by the Company in
its consolidated Federal Income Tax Return and combined State Income Tax
Return, subject to the penultimate sentence of this Section 4.4. Such
hypothetical Income Tax Returns shall be prepared (a) as if the only
transactions and the only income, deductions and credits of the Company, DDL,
DPI and Dominick's for the Period were

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<PAGE> 8
attributable to the Restructuring Transactions and the Stock Redemption
(without giving effect to any other transaction), and (b) otherwise utilizing
proper accounting rules for the preparation of Income Tax Returns; provided,
however, that such hypothetical Income Tax Returns shall not include any
Closing Date Taxes. The Company shall have the right to review such
hypothetical Income Tax Returns (and all related workpapers) prior to their
incorporation into the relevant consolidated Federal Income Tax Returns and
combined State Income Tax Returns, and shall notify the Shareholders of any
disagreement with the information reported in any such hypothetical Income Tax
Returns, whereupon the Company and the Shareholders shall use their best
efforts promptly to resolve any such disagreement; provided, however, that in
the event the Shareholders provide the Company with a legal opinion from a
nationally recognized law firm stating that there is substantial authority in
support of the information and return positions reflected in such hypothetical
Income Tax Returns, such information and return positions shall be incorporated
into the Company's consolidated Federal Income Tax Returns and combined State
Income Tax Returns. The Company shall have the responsibility for timely
remittance of all Income Taxes (including any Transfer Transactions Taxes and
Closing Date Taxes) due with respect to the income, deductions and credits of
the Consolidated Group attributable to the Restructuring Transactions, the
Stock Redemption and the Stock Purchase Transaction.

5. OTHER TAX RETURNS.

5.1 DDI AND DPI RETURNS. With respect to Other Taxes
attributable to DDI and DPI, the Shareholders shall prepare and deliver to DDI
and DPI for filing the Returns required to be filed for the Final Full Period
and the Period including the Short Period. The Company shall have the right to
review any such returns (and all related workpapers) prepared by the
Shareholders prior to filing such returns, and shall notify the Shareholders of
any disagreement with the information reported in any such returns, whereupon
the Company and the Shareholders shall use their best efforts promptly to
resolve any such disagreement; provided, however, that in the event that the
Shareholders provide the Company with a legal opinion from a nationally
recognized law firm stating that there is substantial authority in support of
the information and return positions reflected in such Returns, such
information and return positions shall remain as reported in the Returns
prepared by the Shareholders hereunder. The Shareholders shall pay to the
Company, and the Company shall be responsible for the timely remittance of, all
Other Taxes required by law to be paid by DDI and DPI for the Final Full Period
or the Short Period. At the time the Returns contemplated by this Section 5.1
are delivered to DDI and DPI, the Shareholders shall pay to the Company the
amount of the Other Taxes attributable to DDI and DPI for the Final Full Period
and the Short Period to the extent such Other Taxes exceed the aggregate of the
estimated payments previously made by or on behalf of or attributable to DDI
and/or DPI, as the case may be, for such Periods. To the extent that the
aggregate of the estimated payments previously made by or on behalf of or
attributable to DDI and/or DPI for the Final Full Period or the Short Period
exceeds the liability for Other Taxes for any such Period, the Shareholders
shall be entitled to seek or require DDI and/or DPI to seek, a refund thereof,
and the Consolidated Group shall cooperate therewith as reasonably requested by
the Shareholders.

5.2 COMPANY RETURNS. With respect Other Taxes
attributable to the Company and/or the Subsidiaries, the Company and the
Subsidiaries shall prepare and file the

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<PAGE> 9
Returns or the Final Full Period and the Period including the Short Period.
Except as otherwise provided in Section 5.3 hereof, the Company and the
Subsidiaries shall be liable for and shall indemnify and hold the Shareholders
harmless against Other Taxes attributable to the Company and/or the
Subsidiaries for the Final Full Period and the Short Period.

5.3 RESTRUCTURING TRANSACTIONS; STOCK REDEMPTION. With
respect to Other Taxes attributable to the Restructuring Transactions, the
Shareholders shall prepare and deliver to the Company for filing the Returns
required to be filed by the Consolidated Group or any member thereof as a
result of the Restructuring Transactions. The Company shall have the right to
review any such Returns (and all related workpapers) prepared by the
Shareholders prior to filing such Returns, and shall notify the Shareholders of
any disagreement with the information reported in any such Returns, whereupon
the Company and the Shareholders shall use their best efforts promptly to
resolve any such disagreement; provided, however, that in the event that the
Shareholders provide the Company with a legal opinion from a nationally
recognized law firm stating that there is substantial authority in support of
the information and return positions reflected in such Returns, such
information and return positions shall remain as reported in the Returns
prepared by the Shareholders hereunder. The Shareholders shall pay to the
Company, and the Company shall be responsible for the timely remittance of, all
Other Taxes required by law to be paid by the Consolidated Group with respect
to the Restructuring Transactions.

6. INCOME TAX AUDITS AND PROCEEDINGS.

6.1 NOTICES. The Company shall promptly notify the
Shareholders of the commencement of any audit by either the IRS and/or any
state taxing authority, as the case may be, of the Income Tax Returns of the
Consolidated Group for any Old Period, if the audit could result in an
adjustment that may affect (a) any item of income, deduction or credit of DDI
or DPI for that Period or the Tax with respect thereto, or (b) any item of
income, deduction or credit of the Consolidated Group attributable to the
Restructuring Transactions or the Stock Redemption or Taxes with respect
thereto, or (c) any other item of income, deduction, or credit of the
Consolidated Group for any Old Period. The Shareholders shall, upon receipt of
knowledge thereof, promptly notify the Company of any indication that an
adjustment may be made or proposed in a consolidated Federal Income Tax Return
and/or combined State Income Tax Return of the Consolidated Group for any Old
Period or that might affect the consolidated and/or combined taxable income,
deductions or credits of the Consolidated Group for any Old Period. Such
required notices shall contain Information (to the extent known to the party
giving such notice) describing the pending or threatened audit or assessment
and the potential Tax liability.

6.2 CONTEST. If the Shareholders make a written request
to the Company to contest my proposed adjustment to either a consolidated
Federal Income Tax Return and/or combined State Income Tax Return of the
Consolidated Group for any Old Period that may affect the taxable income or
loss of DDI or DPI for that Period, and if, in the opinion of counsel to the
Shareholders, there exists a meritorious basis for contesting the adjustment,
the Consolidated Group shall contest or settle the proposed adjustment at the
direction and at the expense of the Shareholders. Notwithstanding the
requirements of the preceding sentence, if the proposed adjustment relates to
an item of income, deduction or credit of DDI and/or DPI

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<PAGE> 10
substantially similar to an item of income, deduction or credit of the Company
or the Subsidiaries for which the IRS and/or state taxing authority, as the
case may be, has proposed an adjustment, and if the Company and the
Subsidiaries are not able to settle or contest such item separately, the
Company shall have the right to settle or contest such items, and the
Shareholders shall be bound by the decision so long as the ultimate settlement
of such items is on substantially the same basis for the Company and the
Subsidiaries and DDI and/or DPI, taking into account, separately for the
Company and the Subsidiaries and DDI and/or DPI as to those items, the amounts
of the settlements and the proposed deficiencies.

6.3 RESTRUCTURING TRANSACTIONS; STOCK REDEMPTION. If
the Shareholders make a written request to the Company to contest any proposed
adjustment to either a consolidated Federal Income Tax Return and/or combined
State Income Tax Return of the Consolidated Group that may affect the income,
deductions or credits attributable to the Restructuring Transactions or the
Stock Redemption or Taxes with respect thereto, or any other adjustment hat
could result in the assessment of a Tax deficiency against the Consolidated
Group exceeding $50,000 with respect to any Old Period, and if, in the opinion
of counsel to the Shareholders, there exists a meritorious basis for contesting
the adjustment, the Consolidated Group shall contest or settle the proposed
adjustment at the direction and at the expense of the Shareholders.

6.4 CONTROL OF CONTEST. The Shareholders shall have the
right to participate in, and agree to cooperate with the Consolidated Group in,
any administrative or judicial proceedings in contesting a proposed adjustment
to either a consolidated Federal Income Tax Return or combined State Income Tax
Return of the Consolidated Group as contemplated by Section 6.2 or 6.3 hereof,
including joining with the Consolidated Group as a party in executing such
pleadings and other documents as the Consolidated Group may reasonably request
from time to time. The Shareholders shall have the right to select the initial
court in which to contest a proposed adjustment as contemplated by Section 6.2
or 6.3 hereof that relates solely to the income, deductions and credits of DDI
and/or DPI or that relates solely to the income, deductions and credits
attributable to the Restructuring Transactions and/or the Stock Redemption. If
the payment of any Tax is required in order to file any such judicial
proceeding, the payment shall be made by the party or parties that would
ultimately pay or be responsible for the Tax deficiency under this Agreement if
the court rendered a judgment in favor of the IRS or state taxing authority, as
the case may be. At the direction of the Shareholders, and at the expense of
the Shareholders, the Consolidated Group shall appeal any adverse judicial
determination with respect to an adjustment the contest or settlement of which
is directed by the Shareholders in accordance with Section 6.2 or 6.3 hereof,
unless no appeal lies from the decision.

6.5 SETTLEMENT OF CONTEST. Except as specifically
permitted by this Agreement, the Consolidated Group shall not effect any
compromise or settlement or take or fail to take any other action that would
affect the taxable income or loss of DDI and/or DPI for any Old Period or the
income, deductions and credits attributable to the Restructuring Transactions
or the Stock Redemption or the income, deductions and credits of the
Consolidated Group for any Old Period, or the Income Tax with respect thereto,
or extend the period for assessment and collection of Income Taxes relating to
DDI and/or DPI or the income, deductions and credits

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attributable to the Restructuring Transactions and/or the Stock Redemption or
the income, deductions and credits of the Consolidated Group for any Old
Period, without either (a) the written consent of the Shareholders, or (b)
paying the increase in Federal Income Taxes and/or State Income Taxes, as the
case may be, pertaining thereto, when due without any resort for Purchaser, the
Company, DDI, DPI or the Subsidiaries to reimbursement or indemnity therefor
from the Shareholders under this Agreement or otherwise.

7. OTHER AUDITS AND PROCEEDINGS.

7.1 NOTICES. The Consolidated Group shall, upon receipt
of knowledge thereof, (a) promptly notify the Shareholders of any indication
that an adjustment may be made or proposed in a Tax Return of DDI and/or DPI
that could affect the liability of DDI and/or DPI for Other Taxes for any Old
Period, (b) promptly notify the Shareholders of any indication that an
adjustment may be made or proposed in a Tax Return of any member of the
Consolidated Group that could affect the liability of any member of the
Consolidated Group for Other Taxes attributable to the Restructuring
Transactions or the Stock Redemption, and (c) promptly notify the Shareholders
of any indication that an adjustment may be made or proposed in a Tax Return of
any member of the Consolidated Group that could affect the liability of the
Consolidated Group for Other Taxes for any Old Period.

7.2 CONTEST. If the Shareholders make a written request
to the Company to contest any proposed adjustment to a Tax Return for any Old
Period that may affect the liability of DDI and/or DPI for Other Taxes for that
Period, and if, in the opinion of counsel to the Shareholders, there exists a
meritorious basis for contesting the adjustment, the Company shall cause DDI
and DPI to contest or settle the proposed adjustment at the direction and at
the expense of the Shareholders.

7.3 RESTRUCTURING TRANSACTIONS; STOCK REDEMPTION. If
the Shareholders make a written request to the Company to contest any proposed
adjustment to a Tax Return of any member of the Consolidated Group that may
affect the liability of any member of the Consolidated Group for Other Taxes
attributable to the Restructuring Transactions or the Stock Redemption or any
other adjustment that may result in the assessment of additional Other Taxes
exceeding $50,000, and if, in the opinion of counsel to the Shareholders, there
exists a meritorious basis for contesting the adjustment, the Consolidated
Group shall contest or settle the proposed adjustment at the direction and at
the expense of the Shareholders.

7.4 CONTROL OF CONTEST. The Shareholders shall have the
right to participate in, and agree to cooperate with the Consolidated Group in
any administrative or judicial proceedings in contesting a proposed adjustment
to a Tax Return of DDI and/or DPI as contemplated by Section 7.2 or 7.3 hereof,
including joining with the Consolidated Group as a party in executing such
pleadings and other documents as the Company may reasonably request from time
to time. At the direction of the Shareholders, and at the expense of the
Shareholders, the Consolidated Group shall appeal any adverse determination
with respect to an adjustment the contest or settlement of which is directed by
the Shareholders in accordance with Section 7.2 or 7.3 hereof, unless no appeal
lies from the decision.

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7.5 SETTLEMENT OF CONTEST. No member of the
Consolidated Group shall effect any compromise or settlement or take or fail to
take any other action that would increase the liability of DDI and/or DPI for
Other Taxes for any Period or the income, deductions and credits attributable
to the Restructuring Transactions or the Stock Redemption or the liability of
the Consolidated Group for Other Taxes for any Old Period, or extend the period
for assessment and collection of such Taxes without either (i) the written
consent of the Shareholders, or (ii) paying the resulting increase in such
Taxes without any resort for the Purchaser Parties or the Consolidated Group to
reimbursement or indemnity therefor from the Shareholders under this Agreement
or otherwise.

8. REFUNDS.

If as a result of any adjustment to a Return arising out of an
audit for any Old Period or any settlement thereof made in accordance with this
Agreement or any overpayment of Taxes, the Consolidated Group receives a refund
of Taxes, the Consolidated Group shall: (a) remit such refund to the
Shareholders, as and when such refund is received, to the extent that such
refund relates to an adjustment to items of income, deduction or credit of DDI
and/or DPI; (b) remit such refund to the Shareholders as and when such refund
is received, to the extent that such refund relates to adjustments to items of
income, deduction or credit attributable to the Restructuring Transactions or
the Stock Redemption or the Tax (other than any Closing Date Taxes which are
the responsibility of the Purchaser Parties and the Consolidated Group
hereunder) attributable to the Restructuring Transactions or the Stock
Redemption; or (c) remit such refund to the Shareholders as and when such
refund is received, to the extent that any other adjustment to items of income,
deduction or credit of the Consolidated Group for any Old Period is one in
respect of which any of the Purchaser Parties or the Consolidated Group would
be entitled to indemnification under Section 11.2 of the Purchase Agreement
notwithstanding the provisions of Section 11.7 of the Purchase Agreement.
Interest on any refund shall be payable by crediting a pro rata portion of the
amount of interest received from the taxing authority with respect to such
refund

9. DEFICIENCIES.

9.1 DDI AND DPI ITEMS. If as a result of any adjustment
to any Income Tax Return arising out of an audit for any Old Period or any
other formal action agreed to by any member of the Consolidated Group in
accordance with this Agreement, a taxing authority disallows any deduction
attributable to DDI and/or DPI taken on such Return, DDLLC shall remit to the
Company an amount equal to any interest and penalties payable to the taxing
authority with respect thereto and the net loss of Income Tax Benefit to the
Consolidated Group by reason of the disallowance of such deduction as and when
the Income Tax Benefit associated with such deduction is lost by the
Consolidated Group.

9.2 RESTRUCTURING TRANSACTIONS; STOCK REDEMPTION. If as
a result of any adjustment to any Return arising out of an audit for any Old
Period or any other formal action agreed to by any member of the Consolidated
Group in accordance with this Agreement, a taxing authority disallows any
deduction or increases the amount of any income attributable to the
Restructuring Transactions or Stock Redemption taken or reported on an Income
Tax Return

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<PAGE> 13
for any Old Period, the Shareholders shall pay the Company the net loss of
Income Tax Benefits to the Consolidated Group by reason of the disallowance of
such deduction as and when the Income Tax Benefits associated with such
deduction are lost by the Consolidated Group. If and to the extent that any
such disallowed deduction may be taken by the Consolidated Group in any
subsequent Period, the Company shall remit to DDLLC an amount equal to the
Income Tax Benefits to the Consolidated Group by reason of such deduction as
and when such Income Tax Benefits are received by the Consolidated Group, but
only to the extent of the payments made by the Shareholders to the Company as a
consequence of the adjustment to the Return for the Period including the Short
Period. If the Consolidated Group has a net operating loss in the subsequent
Period in which such previously disallowed deduction is taken, then the
Consolidated Group shall, to the extent permitted under the applicable
provisions of the Code, carryback such loss to prior Periods and seek all
appropriate refunds.

9.3 OTHER ADJUSTMENTS. If as a result of any other
adjustment to any Return arising out of an audit for any Old Period or any
other formal action agreed to by the Consolidated Group in accordance with this
Agreement, a taxing authority disallows any deduction attributable to the
Consolidated Group taken on an Income Tax Return for any Old Period or the
Period including the Short Period, the Company shall remit to the Shareholders
an amount equal to the Income Tax Benefits to the Consolidated Group by reason
of such deduction if taken in a subsequent Period as and when such Income Tax
Benefits are received by the Consolidated Group, but only to the extent of any
indemnification payment which is paid by the Shareholders under Section 11.2 of
the Purchase Agreement as a direct or indirect consequence of the adjustment to
the Return for the Old Period.

10. INCOME TAX BENEFITS.

10.1 DEFINITION. As used in this Agreement, the term
"Income Tax Benefit" shall mean any deductions, losses or credits or any
decrease in income, gains or recapture of credits for the benefitting entity
(or group of entities).

10.2 WHEN REALIZED. An Income Tax Benefit shall be
deemed to have been realized for purposes of this Agreement (a) at the time any
refund of Income Taxes is received, (b) at the time any refund of Income Taxes
is applied against other Taxes due (which, in the case of refunds so applied in
the course of an audit or other proceeding, shall be the date on which the
audit or other proceeding is finalized), or (c) at the time a liability for
Income Taxes is otherwise reduced (which shall be 2 1/2 months after the close
of the taxable year in which such liability for Income Taxes arose).

10.3 COMPUTATION OF AMOUNT. The amount of an Income Tax
Benefit realized in any taxable period by an entity (or group of entities) with
respect to a particular Income Tax Benefit item shall be equal to the excess of
(a) the Tax liability of such entity (or group) for such taxable period,
computed without regard to such Income Tax Benefit item, over (b) the actual
Tax liability of such entity (or group) for such taxable period. The
computation of the amounts in clauses (a) and (b) shall take into account the
alternative minimum tax (and any credits with respect thereto).

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<PAGE> 14
10.4 SUBSEQUENT CHANGES. Appropriate payments shall be
made between the parties to take account of subsequent changes in or detriments
(e.g., Income Taxes payable with respect to the receipt of refunds or interest
thereon) associated with an Income Tax Benefit.

11. COOPERATION.

The parties shall cooperate fully with each other in all
matters relating to Taxes and in the determination of amounts payable under
this Agreement. The Consolidated Group shall reimburse the Shareholders for
the reasonable out-of-pocket expenses that they incur in providing any
assistance to the Consolidated Group in the filing of any Return or any audit
thereof or the determination of any Tax for which the Consolidated Group is
responsible under this Agreement, and the Shareholders shall reimburse the
Consolidated Group for the reasonable out-of-pocket expenses incurred in
providing any assistance to the Shareholders in the filing of any return or any
audit thereof or the determination of any Tax for which the Shareholders are
responsible under this Agreement. In addition, the Shareholders shall
reimburse the Consolidated Group for the reasonable out-of-pocket expenses that
they incur in preparing and filing Returns that are required to be filed solely
by reason of the Restructuring Transactions or the Stock Redemption and in
connection with any audit thereof or the determination of any Tax attributable
to the Restructuring Transactions or the Stock Redemption, except to the extent
that such audit or determination of Tax relates to any Closing Date Taxes or
Stock Purchase Taxes. In the case of disagreement as to the course of action
to be pursued in dealing with taxing authorities (including, without
limitation, matters with respect to preparation and filing of Returns, conduct
of audits and proceedings in courts), except as otherwise expressly provided in
this Agreement, the decision of the party (the Consolidated Group, on the one
hand, or the Shareholders, on the other hand) that will economically benefit
from or be burdened by, the decision (or the party with the greatest benefit or
burden) shall control, but the controlling party shall indemnify the other
party from and against losses, damages and expenses incurred by the indemnified
party in pursuance of such course of action in excess of the losses, damages
and expenses which would have been incurred by the indemnified party had the
course of action proposed by the indemnified party been pursued. Any party
involved in any formal or informal action or proceeding relating to Tax matters
which affects the other party shall promptly give such other party written
notice thereof and keep such other party fully and timely informed of
developments.

12. MISCELLANEOUS PROVISIONS.

12.1 LIMITATION PERIOD. Notwithstanding any other
provision of this Agreement or the Purchase Agreement, no payment shall be
required to be made under this Agreement unless a written claim for such
payment, along with information and documentation reasonably necessary to
support such claim, is delivered to the party requested to make such payment
prior to the expiration of the applicable Tax statute of limitations with
respect to the Period to which such claim relates, as such limitation period
may be extended from time to time in accordance with this Agreement.

12.2 NOTICES. All notices, consents, requests,
instructions, approvals, and other communications provided for herein and in
all legal process in regard hereto shall be

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<PAGE> 15
validly given, made or served if given in writing and delivered personally,
sent by facsimile transmission or sent by registered or certified mail, return
receipt requested, with postage prepaid, as follows:

If to the Purchasing c/o Dominick's Finer Foods, Inc.
Parties or the 333 Northwest Avenue
Consolidated Group to: Northfield, Illinois 60164
Attention: General Counsel
Facsimile No. 708-409-3979

with a copy to: The Yucaipa Companies
10000 Santa Monica Boulevard
Fifth Floor
Los Angeles, California 90067
Attention: Mark A. Resnik, Esq.
Facsimile No. 310-789-7201

and a copy to: Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071-20007
Attention: Thomas C. Sadler, Esq.
Facsimile No. 213-891-8763

If to the Shareholders, c/o Mr. Ivan S. Novick
to: Suite 250
450 East Devon Street
Itasca, Illinois 60143-1266
Facsimile No. 708-773-0171

with a copy to: Jenner & Block
One IBM Plaza
Chicago, Illinois 60611
Attention: Bruce G. Wilson, Esq.
Facsimile No. 312-527-0484

The address designated by any party hereto for the delivery of notices may be
changed from time to time by written notice delivered in a like manner. Notice
given by mail as set forth above shall be deemed delivered on the date the same
is postmarked, and notices delivered personally or by facsimile shall be deemed
delivered at the time of receipt thereof at the address or the facsimile number
set forth above.

12.3 BINDING EFFECT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their successors and
assigns. This Agreement shall not create any rights in any person other than
the parties hereto and their respective successors and assigns.

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<PAGE> 16
12.4 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, and each counterpart shall constitute an original
instrument, but all such separate counterparts shall constitute one and the
same agreement.

12.5 GOVERNING LAW AND VENUE. The validity, construction
and enforceability of this Agreement shall be governed in all respects by the
laws of the State of Illinois without regard to its conflict of laws rules.
Any action concerning the validity, construction or enforceability of this
Agreement shall be brought before a court of competent jurisdiction in Cook
County, Illinois.

12.6 SUCCESSORS AND ASSIGNS. Neither this Agreement, nor
any of the rights, duties or obligations hereunder, may be assigned by
operation of law or otherwise by the parties hereto without the prior written
consent of all other parties hereto; provided, however, that (i) all of the
rights, duties and obligations of the parties hereto shall survive the Mergers;
and (ii) Holdings and the Consolidated Group may assign this Agreement and
their rights hereunder to the agent bank pursuant to the Collateral Documents
(as defined in that certain credit Agreement dated as of March 22, 1995 among
Dominick's Supermarkets, Inc. and the other parties thereto and the lenders
identified therein).

12.7 WAIVER OF PROVISIONS. The terms, covenants,
warranties and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party
at any time to require performance of any provision hereof shall, in no manner,
affect the right at a later date to enforce the same. No waiver by any party
of any condition, or breach of any provision, term, covenant or warranty
contained in this Agreement, whether by conduct or otherwise, in any one or
more instances, shall be deemed to be or construed as a further or continuing
waiver of any such condition or of the breach of any other provision, term,
covenant or warranty of this Agreement.

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<PAGE> 17
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.

<TABLE>
<S> <C>
DOMINICK'S SUPERMARKETS, INC., a Delaware DODI, L.L.C., an Illinois limited liability
Corporation company

By /s/ Ronald W. Burkle By /s/ James S. DiMatteo
------------------------------------------------- -------------------------------------------------
Ronald W. Burkle, President James S. DiMatteo, Manager

DFF ACQUISITION STUB TWO, INC., a Delaware DODI FAMILY L.L.C., an Illinois limited liability
corporation company

DFF ACQUISITION SUB, INC., a Delaware corporation DODI DEVELOPMENTS, L.L.C., an Illinois limited
liability company

By /s/ Ronald W. Burkle
-------------------------------------------------
Ronald W. Burkle, President By /s/ James S. DiMatteo
-------------------------------------------------
James S. DiMatteo, Manager
</TABLE>

(signatures continued on next page)

17
<PAGE> 18
(signatures continued from previous page)

<TABLE>
<S> <C>
DODI, INC. DODI DEVELOPMENTS, INC., a Delaware corporation
a Delaware corporation

By /s/ James S. DiMatteo
-------------------------------------------------
By /s/ James S. DiMatteo James S. DiMatteo, Manager
-------------------------------------------------
James S. DiMatteo, Manager

DOMINICK'S FINER FOODS, INC., a Delaware
DODI PROPERTIES, INC., a Delaware corporation corporation

By /s/ James S. DiMatteo By /s/ James S. DiMatteo
------------------------------------------------- -------------------------------------------------
James S. DiMatteo, Manager James S. DiMatteo, Manager

DOMINICK'S FINER FOODS, INC. OF ILLINOIS, an DODI HAZELCREST, INC., a Delaware corporation
Illinois corporation

JERRY'S DEEP DISCOUNT CENTERS, INC., an Illinois
KOHL'S OF BLOOMINGDALE, INC., an Illinois corporation
corporation

SAVE-IT DISCOUNT FOODS CORPORATION, an Illinois
corporation

By /s/ James S. DiMatteo
-------------------------------------------------
James S. DiMatteo, Manager

</TABLE>

<PAGE> 1

Exhibit 10.4

EMPLOYMENT AGREEMENT

THIS AGREEMENT (this "Agreement"), made and entered into as of
March 22, 1995, between DOMINICK'S FINER FOODS, INC., a Delaware corporation
having its executive offices and a principal place of business in the Chicago,
Illinois (the "Employer"), and ROBERT A. MARIANO (the "Employee").

RECITALS

A. It is the desire of the Employer to assure itself of the
management services of the Employee by directly engaging the Employee as the
President and Chief Operating Officer of the Employer.

B. The Employee desires to commit himself to serve the
Employer on the terms herein provided.

NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements set forth below the parties hereto agree as
follows:

ARTICLE I

POSITION AND TERM

1.1 POSITION. The Employer agrees to and does employ the
Employee and the Employee shall enter the employ of the Employer to perform his
duties as President and Chief Operating Officer or and such other or additional
incidental or customary duties as determined by the Board of Directors of the
Employer (the "Board") or the Chief Executive Officer of the Employer (the
"CEO").

1.2 PERIOD OF CONTRACT EMPLOYMENT. The term "Period of
Contract Employment," as used herein, means the period beginning on the date
(the "Commencement Date") of the consummation of the Stock Purchase
Transactions (as defined in that certain Stock Purchase Agreement, dated as of
January 17, 1995, by and among Dominick's Supermarkets, Inc. (formerly named
DFF Holdings, Inc.), DFF Acquisition Sub, Inc., Dodi L.L.C., Dodi Family
L.L.C., and Dodi Developments, L.L.C.), as amended, and ending on the earlier
of the third anniversary thereof or at the time of the Termination of Contract
Employment (as defined in Section 3.1 below).

1.3 EXTENSION OF PERIOD OF CONTRACT EMPLOYMENT. The
Period of Contract Employment may be extended by a written agreement of the
Employer and the Employee. Notwithstanding the foregoing, neither the Employer
nor the Employee shall have any obligation to extend the Period of Contract
Employment. If the Employee remains in the employ of the Employer following
the Period of Contract Employment and any extension thereof in accordance with
this Section 1.3, such employment shall be at will unless different terms of
employment are established in writing.
<PAGE> 2
1.4 SUSPENSION OF SERVICES.

(a) Except in the case of a Termination of Contract
Employment under Article III, in the event that the Employee is advised by the
Employer in writing that his services will no longer be required during the
remainder of the Period of Contract Employment, this shall be treated as a
suspension of services and, except for the purposes set forth in Section 2.4
and 2.5, and except as prohibited by applicable laws and regulations, the
Employee shall continue to be treated as an employee of the Employer for all
purposes including eligibility for those fringe benefits provided for in
Section 2.3, and shall continue to be compensated by the Employer (subject to
the possible offset set forth in subsection (b) below) during the remainder of
the Period of Contract Employment at the rate of "Total Compensation" to which
the Employee was entitled at time of suspension of services. The provisions of
Section 4.3 shall continue to apply in the event of a suspension of services.
The portion of the Period of Contract Employment prior to the suspension of
service is referred to herein as the "Period of Active Employment." For
purposes of this Agreement, the term "Total Compensation" shall mean the Base
Salary set forth in Section 2.1, any increases to such Base Salary granted by
the Employer in accordance with Section 2.1 and any Bonus Compensation earned
by the Employee pursuant to Section 2.2 during the portion of the year of
suspension of services of the Employee which falls within the Period of Active
Employment.

(b) In the event of suspension of services in accordance
with subsection (a) above, the Employee shall be free to become engaged with
another business in any capacity but in such event, fifty percent (50%) of the
compensation of any kind (including deferred compensation and compensation
assigned to an entity or individual other than the Employee) received from or
earned with respect to such other business (except from businesses or
investments owned by the Employee before the date of suspension of services for
which there will be no deduction) and one hundred percent (100%) of the
compensation of any kind (including deferred compensation and compensation
assigned to an entity or individual other than the Employee) received from or
earned with respect to a "Competing Business" (as defined in Section 4.4
below), in each case attributable to the Period of Contract Employment, shall
be subtracted from any amounts otherwise due the Employee from the Employer.
The Employee shall not take any actions to prevent compensation received from
or earned with respect to such other business from being applied pursuant to
this Section 1.4(b) to reduce amounts otherwise due the Employee from the
Employer.

ARTICLE II

COMPENSATION

2.1 ANNUAL BASE SALARY. During the Period of Contract
Employment, the Employer agrees to pay the Employee a base salary in the annual
amount of Four Hundred Thousand Dollars ($400,000) (the "Base Salary");
provided, however, that the agreement as to said amount shall not preclude or
in any way affect the grant by the Employer or the receipt by the Employee of
increases in the Base Salary, or of Bonus Compensation or other forms of
additional compensation (including insurance and other employee plan benefits),
such increases, contingent or otherwise, to be determined solely in the
discretion of the Board or a committee of the Board to which such authority is
delegated by the Board, and such Bonus Compensation and additional
compensation, contingent or otherwise, to be determined in accordance with
Sections 2.2 and 2.3,

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<PAGE> 3
respectively. The Base Salary shall be payable as current salary, in monthly
installments subject to all applicable withholding and deductions, and at the
same monthly rate as adjusted for any fraction of a month unexpired at the
Termination of Contract Employment.

2.2 BONUS COMPENSATION. The Employee shall be entitled
to an annual incentive bonus to be paid at such times as the Board shall
determine and to be based upon the Employee's performance during each fiscal
year as measured by the following formula: In the event that the applicable
performance criteria (as determined by the Board) of the Employer or its
successor, shall equal the fiscal year bonus target established by the Board
(the "Bonus Target"), the Employee shall be entitled to receive a bonus payment
equal to 100% of his Base Salary. The fiscal 1995 Bonus Target is attached
hereto as Exhibit B. The bonus payment shall be increased ratably to a maximum
of 200% of Base Salary in the event 115% or more of the Bonus Target is
actually achieved, and the bonus payment shall be decreased ratably to 50% of
Base Salary in the event that 85% of the Bonus Target is actually achieved. No
bonus shall be payable if less than 85% of the Bonus Target is actually
achieved. By way of example, if 110% of the Bonus Target is actually achieved,
then the Employee's bonus for that fiscal year shall be 167% of his Base
Salary, and if 90% of the Bonus Target is actually achieved, then the
Employee's bonus for that fiscal year shall be 67% of his Base Salary. Bonuses
to be paid hereunder shall be paid not later than ten (10) days after the
receipt of the Employer's audited financial statements.

2.3 BENEFITS. During the Period of Contract Employment,
the Employee shall be entitled to participate in or receive benefits under any
employee benefit plan or other arrangement including, but not limited to, those
benefit plans or arrangements set forth on Exhibit A hereto and any other
medical, dental, retirement, disability, life insurance, sick leave and
vacation plans or arrangements generally made available by the Employer to its
executive officers, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans or arrangements; provided,
however, that such plans and arrangements are made available at the discretion
of the Employer and nothing in this Agreement establishes any right of the
Employee to the availability or continuance of any such plan or arrangement,
including pursuant to Section 1.4(a).

2.4 REIMBURSEMENT OF BUSINESS EXPENSES. The Employer
shall reimburse the Employee for the ordinary and necessary expenses incurred
by him in connection with the performance of his duties hereunder, including,
but not limited to, ordinary and necessary travel expenses and entertainment
expenses, according to the policies established from time to time by the
Employer for its executive officers. The Employee shall provide the Employer
with an accounting of his expenses, which accounting shall clearly reflect
which expenses are reimbursable by the Employer. The Employee will provide the
Employer with such other supporting documentation and other substantiation of
reimbursable expenses as will conform to Internal Revenue Service of other
requirements.

2.5 AUTOMOBILE ALLOWANCE. The Employer agrees that
during the Period of Active Employment the Employer shall furnish one
automobile to the Employee, of a make and year determined by the Employer, to
be used by the Employee in connection with the performance of his duties
hereunder for and on behalf of the Employer. All reasonable expenses incurred
by the Employee in operating such automobile in the performance of his duties
(including, but not limited to, fuel, parking fees, licenses, repairs and
maintenance) shall be paid by the Employer or reimbursed by it to the Employee
according to the policies established from time to time by the Employer for its
executive officers. The Employee shall regularly submit to the Employer

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<PAGE> 4
adequate records to substantiate such expenses and copies of any other
documentation reasonably required. The Employer shall maintain automobile
liability insurance in such amounts as shall be determined by the Board to be
necessary to protect the Employee and the Employer while the automobile is
being operated for and on the Employer's behalf.

ARTICLE III

TERMINATION OF CONTRACT EMPLOYMENT

3.1 AUTOMATIC TERMINATION. This Agreement and the
Employee's employment hereunder shall automatically terminate upon the first to
occur of the following circumstances (any such termination and any termination
pursuant to Section 3.2 is referred to herein as a "Termination of Contract
Employment"):

(a) Expiration. The failure of the parties prior
to the third anniversary of the Commencement Date to extend the Period of
Contract Employment pursuant to Section 1.3 or the expiration of any extension
of the Period of Contract Employment;

(b) Death. The Employee's death; or

(c) Disability. The failure of the Employee,
during the Period of Contract Employment, to render services to the Employer
for a continuous period of six (6) months, because of the Employee's physical
or mental disability during said period. If there should be any dispute
between the parties as to the Employee's physical or mental disability at any
time, such question shall be settled by the opinion of an impartial reputable
physician agreed upon for the purpose by the parties or their representatives,
or failing agreement within ten (10) days of a written request therefor by
either party to the other, then one designated by the then president of the
Chicago Medical Society. The certificate of such physician as to the matter in
dispute shall be final and binding on the parties; or

3.2 PERMISSIVE TERMINATION. This Agreement and the
Employee's employment hereunder may be terminated by the Employer or the
Employee, as applicable, under the following circumstances:

(a) Resignation or Retirement. The Employee may
voluntarily resign or retire upon thirty (30) days' prior written notice to the
Employer; or

(b) Without Cause. The Employer may terminate
the Employee's employment at any time upon thirty (30) days' prior written
notice to the Employee; or

(c) Cause. The Employer may terminate the
Employee's employment based upon (i) breach by the Employee of any material
covenant under this Agreement and the failure of the Employee to cure such
breach within thirty (30) days after written notice of such breach is given by
the Employer to the Employee; (ii) commission by the Employee of theft or
embezzlement of Employer property or other acts of dishonesty; (iii) commission
by the Employee of a crime resulting in injury to the business, property or
reputation of the Employer or commission of other significant activities
harmful in any material way to the business or reputation of the Employer; (iv)
commission of an act by the Employee in the performance of his duties

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<PAGE> 5
hereunder amounting to gross, willful or wanton negligence; (v) willful refusal
to perform or substantial neglect of the duties assigned to the Employee
pursuant to Article I hereof; or (vi) any significant violation of any
statutory or common law duty of loyalty to the Employer.

3.3 BENEFITS PAYABLE. The severance benefits payable to
the Employee by reason of termination of the Period of Contract Employment
under the circumstances described in Sections 3.2(a) or (b) shall be payment of
a cash lump sum (subject to applicable withholding) equal to three times the
Employee's then annual Base Salary, minus the Cancellation Amount (as defined
in the Cancellation and Settlement Agreement dated as of March 21, 1995 among
the Employee, the Employer and Dominick's Supermarkets, Inc.). In addition,
Employee shall be entitled to continue to participate in the benefits described
in Section 2.3 hereof for a period of 24 months following termination of
Contract Employment under the circumstances described in Sections 3.2(a) or
(b). The Employee shall not be required to mitigate the amount of any payment
or benefit provided in this Section 3.3 by seeking other employment or
otherwise, except that Employer may suspend the payment of benefits described
in Section 2.3 at such time as the Employee becomes eligible to receive
corresponding benefits from a new employer. No severance benefits of any kind
shall be payable to the Employee by reason of termination of the Period of
Contract Employment under the circumstances described in Sections 3.1 or
3.2(c).

3.4 SURRENDER OF PROPERTIES. Upon termination of the
Employee's employment with the Employer, regardless of the reason therefor, the
Employee shall promptly surrender to the Employer all property provided to him
by the Employer for use in relation to his employment, and, in addition, the
Employee shall surrender to the Employer any and all sales material, price
lists, financial information, files, records, or other materials and
information in his possession or under his control of or pertaining to the
Employer or its business or financial affairs, including, but not limited to,
costs, pricing information, markets or prospective markets, market research,
marketing strategies, computer programs, assets, suppliers, services, and
personnel and compensation matters.

ARTICLE IV

COVENANTS

4.1 FULL-TIME EMPLOYEE. The Employee hereby covenants
and agrees that during the Period of Contract Employment he will faithfully and
in conformity with the directions of the Board, or of an officer of the
Employer duly authorized by the Board, perform the duties of his employment
hereunder, and that he shall be a full-time employee of the Employer and that
he shall devote to the performance of said duties all such time and attention
as they shall reasonably require, taking, however, from time to time (as the
Employer agrees that he may) reasonable vacations.

4.2 NO DETRACTION FROM PERFORMANCE. The Employee hereby
consents and agrees that during the Period of Contract Employment he will not,
without the express consent of the Board or a committee of the Board to which
such authority is delegated by the Board or the Chief Executive Officer of the
Employer, become actively associated with or engaged in any business other than
that of the Employer, or a division or subsidiary of the Employer, that would
detract from the performance of his duties to the Employer, and he will do
nothing inconsistent with such duties. Nothing herein shall preclude the
Employee from engaging in charitable,

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<PAGE> 6
religious or civic activities or the management of his personal investments, to
the extent that such activities do not detract from the performance of his
duties to the Employer.

4.3 CONFIDENTIAL INFORMATION. It is recognized by the
Employee and the Employer that the Employee's duties during the Period of
Contract Employment will entail the receipt of confidential information
concerning not only the Employer's current operations and procedures but also
its short-range and long-range plans. The Employee hereby covenants and agrees
that during the Period of Contract Employment and at any time thereafter (or,
in the case of Confidential Information (as defined below) solely relating to
competitive information about the Employer, for a period of two years), he will
not disclose to anyone outside of the Employer, or use in any activity or
business (other than the Employer's business), Confidential Information (as
defined below) relating to the Employer's business, in any way obtained by him
while employed by the Employer, unless authorized by the Employer in writing.
It is understood that violation of this provision would cause irreparable harm
to the Employer and that the Employer may seek to enjoin any such violation or
to take any other applicable action.

For purposes of this Agreement, the term "Confidential
Information" shall include all information of any nature and in any form which
is owned by the Employer and which is not publicly available or generally known
to persons engaged in businesses similar to that of the Employer, including,
but not limited to, research techniques; patents and patent applications;
inventions and improvements, whether patentable or not; development projects;
computer software and related documentation and materials; designs, practices,
processes, methods, know-how and other facts relating to the business of the
Employer; practices, processes, methods, know-how and other facts related to
sales, advertising, promotions, financial matters, customers, customer lists or
customers' purchases of goods or services from the Employer; industry
contracts; and all other secrets and information of a confidential and
proprietary nature.

4.4 COMPETING BUSINESS. The Employee hereby covenants
and agrees that, during the Period of Contract Employment, the Employee will
not have any investment in a Competing Business (as defined below) other than
an equity interest of less than five percent (5%) of any company whose
securities are listed on The New York Stock Exchange, The American Stock
Exchange or NASDAQ and will not render personal services to any Competing
Business in any manner or engage in or in any manner be connected or concerned
with, directly or indirectly, any Competing Business, including, without
limitation, as owner, partner, director, trustee, officer, employee, creditor,
consultant or advisor thereof.

For purposes of this Agreement, "Competing Business" shall
mean any business which (i) is engaged in, owns or operates any retail grocery,
drug or combination store (either as a stand-alone grocery, drug or combination
store or as part of a merchandising operation also involving non-grocery and
non-drug items) in any area where the Employer or any of its subsidiaries
presently does business or, at any time during the Period of Contract
Employment, did business; or (ii) is a supplier, directly or indirectly, to any
such retail grocery, drug or combination store.

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<PAGE> 7
enjoin any competing business from receiving from the Employee or using any
such Confidential Information and/or to enjoin any competing business from
retaining or seeking to retain any other employees of the Employer.

4.5 COMPETITION FOLLOWING TERMINATION. Within the
two-year period following termination of the Employee's employment with the
Employer, regardless of the reason therefor, the Employee shall not, without
the prior written consent of the Employer, which consent may be withheld at the
sole discretion of the Employer, engage in or in any manner be connected or
concerned with, directly or indirectly, any Competing Business operating at a
location within twenty (20) miles of any retail operation of the Employer in
existence at the time of such termination.

4.6 NO SOLICITATION. The Employee hereby covenants and
agrees that during the Period of Contract Employment or at any time during the
two-year period thereafter, he will not, for himself or any third party,
directly or indirectly, (i) divert or attempt to divert from the Employer any
business of any kind in which the Employer is engaged with entities which
maintained a business relationship with the Employer (or any entities which
were contacted or solicited about entering into a business relationship with
the Employer) during any period the Employee was employed by the Employer,
including, without limitation, the solicitation of the Employer's customers or
interference with any of its suppliers or customers; or (ii) employ or solicit
for employment any person employed by the Employer during the period of the
Employee's employment.

4.7 CONSIDERATION BARGAINED. The Employee acknowledges
that all sums the Employer has undertaken to pay the Employee under this
Agreement following termination of employment are undertaken by the Employer in
consideration for the covenants of the Employee set forth in this Article IV,
whether or not those sums the Employer has undertaken to pay become due and
payable. In the event of any breach by the Employee of the covenants set forth
in this Article IV: (a) the Employer shall be excused from paying any sums or
providing any benefits to the Employee that the Employer would otherwise be
required to pay or provide to the Employee under this Agreement after
termination of employment; and (b) the Employee shall refund to the Employer on
demand all sums paid to the Employee under this Agreement subsequent to the
effective date of termination of employment.

4.8 ACKNOWLEDGMENT. The Employee acknowledges that the
restrictions set forth in Article IV are reasonable in scope and essential to
the preservation of the Employer's business and proprietary properties and the
enforcement thereof will not in any manner preclude the Employee, in the event
of the Employee's termination of employment with the Employer, from becoming
gainfully employed in such manner and to the extent as to provide a standard of
living for himself, the members of his family, and those dependent upon him of
at least the sort and fashion to which he and they have become accustomed and
may expect.

7
<PAGE> 8
portion of any sentence, paragraph, clause, or combination of the same of this
Agreement is in violation of the law of any state where applicable, such
portion of said sentence, paragraph, clause or combination of the same shall be
void in the jurisdictions where it is unlawful, but the remainder of such
sentence, paragraph, clause, or combination of the same and this Agreement
shall remain binding on the parties to make the covenants of this Agreement
binding to the full extent lawful under existing applicable laws. In the event
that any part of any covenant of this Agreement is determined by a court of law
to be overly broad thereby making the covenant unenforceable, the parties
hereto agree, and it is their desire, that such court shall substitute the
broadest judicially enforceable limitation in its place, and that as so
modified the covenant shall be binding upon the parties as if originally set
forth herein.

4.10 REMEDIES. The Employee and the Employer agree that
the Employer will be irreparably harmed by any violation or threatened
violation of any of the foregoing provisions of this Article IV if such
provisions are not specifically enforced and therefore that the Employer shall
be entitled to an injunction restraining any violation of such provisions by
the Employee, or any other appropriate decree of specific performance. Such
remedies shall not be exclusive and shall be in addition to any other remedy to
which the Employer may be entitled under this Agreement or at law.

ARTICLE V

MISCELLANEOUS

5.1 SUCCESSORS. This Agreement shall inure to the
benefit of the Employer and its successors and assigns, as applicable. If the
Employer shall merge or consolidate with or into, or transfer substantially all
of its assets, including goodwill, to another corporation or other form of
business organization, this Agreement shall bind and run to the benefit of the
successor of the Employer resulting from such merger, consolidation, or
transfer. The Employee shall not assign, pledge, or encumber his interest in
this Agreement, or any part thereof, without the prior written consent of the
Employer, and any such attempt to assign, pledge or encumber any interest in
this Agreement shall be null and void and shall have no effect whatsoever.

5.2 GOVERNING LAW. THIS AGREEMENT IS BEING MADE AND
EXECUTED IN AND IS INTENDED TO BE PERFORMED IN THE STATE OF ILLINOIS AND SHALL
BE GOVERNED, CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF ILLINOIS, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES
THEREOF.

5.3 ENTIRE AGREEMENT. This Agreement comprises the
entire agreement between the parties hereto relating to the subject matter
hereof and as of the Commencement Date, supersedes, cancels and annuls all
previous employment agreements between the Employer (and/or its predecessors)
and the Employee, as the same may have been amended or modified, and any right
of the Employee thereunder other than for compensation accrued thereunder as of
the date hereof, and supersedes, cancels and annuls all other prior written and
oral agreements between the Employee and the Employer or any predecessor to the
Employer. The terms of this Agreement are intended by the parties to be the
final expression of their agreement with respect to the employment of the
Employee by the Employer and may not be contradicted by evidence of any prior
or contemporaneous agreement.

8
<PAGE> 9
5.4 GENDER. Words in the masculine herein may be
interpreted as feminine or neuter, and words in the singular as plural, and
vice versa, where the sense requires.

5.5 DISPUTES. If any arbitration or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding, in addition to any other relief that may be granted.

5.6 SEVERABILITY; ENFORCEABILITY. If any provision of
this Agreement, or the application thereof to any person, place, or
circumstance, shall be held to be invalid, unenforceable, or void by the final
determination of a court of competent jurisdiction in any jurisdiction and all
appeals therefrom shall have failed or the time for such appeals shall have
expired, as to that jurisdiction and subject to this Section 5.6, such clause
or provision shall be deemed eliminated from this Agreement but the remaining
provisions shall nevertheless be given full force and effect. In the event
this Agreement or any portion hereof is more restrictive than permitted by the
law of the jurisdiction in which enforcement is sought, this Agreement or such
portion shall be limited in that jurisdiction only, and shall be enforced in
that jurisdiction as so limited to the maximum extent permitted by the law of
that jurisdiction.

5.7 VALIDITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.

5.8 NOTICES. Any notice, request, claim, demand,
document and other communication hereunder to any party shall be effective upon
receipt (or refusal of receipt) and shall be in writing and delivered
personally or sent by telex, telecopy, or certified or registered mail, postage
prepaid, as follows:

(a) If to the Employer, addressed to its
principal offices to the attention of the CEO and the General Counsel.

(b) If to the Employee, to him at the address set
forth below under his signature;

or at any other address as any party shall have specified by notice in writing
to the other parties.

5.9 COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original, but all
of which together will constitute one and the same Agreement.

5.10 AMENDMENTS; WAIVERS. This Agreement may not be
modified, amended, or terminated except by an instrument in writing, approved
by the Board and signed by the Employee and the Employer. By an instrument in
writing similarly executed, the Employee or the Employer may waive compliance
by the other party or parties with any provision of this Agreement that such
other party was or is obligated to comply with or perform; provided, however,
that such waiver shall not operate as a waiver of, or estoppel with respect to,
any other or subsequent failure. No failure to exercise and no delay in
exercising any right, remedy or power

9
<PAGE> 10
hereunder shall preclude any other or further exercise of any other right,
remedy or power provided herein or by law or in equity.

5.11 SURVIVAL OF COVENANTS. The covenants of the Employee
set forth in Article IV of this Agreement shall service the termination of the
Period of Contract Employment or termination of this Agreement, regardless of
the reason therefor.

5.12 NO INCONSISTENT ACTIONS. The parties hereto shall
not voluntarily undertake or fail to undertake any action or course of action
inconsistent with, or to avoid or evade, the provisions or essential intent of
this Agreement. Furthermore, it is the intent of the parties hereto to act in
a fair and reasonable manner with respect to the interpretation and application
of the provisions of this Agreement.

10
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.

DOMINICK'S FINER FOODS, INC.

By: /s/ Ronald Burkle
----------------------------------------
Name: RONALD BURKLE
Title: CHIEF EXECUTIVE OFFICER

/s/ Robert A. Mariano
-------------------------------------------
ROBERT A. MARIANO

Address: 5706 RFD
Long Grove, IL 60047

11
<PAGE> 12
EXHIBIT A

BENEFIT PLANS

Dominick's Supermarkets, Inc. 1995 Stock Option Plan (See Annex I)

Senior Management Short Term Disability Plan (See Annex II)

Senior Management Long Term Disability Plan (See Annex III)

Senior Management Death Benefit and Capital Accumulation Plan (See Annex IV)

Senior Management Financial Planning Program (See Annex V)

A-1
<PAGE> 13
EXHIBIT B

FISCAL 1995 BONUS TARGET

<TABLE>
<CAPTION>
(dollars in thousands)
<S> <C>
Pre-Acquisition EBITDA (Periods 1-6)(1) $ 51,740
Post-Acquisition EBITDA (Periods 7-13) $ 61,484
--------

TOTAL EBITDA $113,224
========
</TABLE>

(1) "EBITDA" is defined as the net income (or loss) of the Company and its
subsidiaries on a consolidated basis, determined in accordance with GAAP,
excluding (to the extent included therein) without duplication, (i) all net
extraordinary gains (or losses), (ii) total interest expense of the Company and
its subsidiaries on a consolidated basis with respect to outstanding
indebtedness of the Company and its subsidiaries, including without limitation,
all commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing and net costs under interest
rate swap, cap, collar or similar agreements, (iii) provisions for taxes based
on income, (iv) total depreciation expense, (v) total amortization expense, (vi)
LIFO provision, and (vii) other non-cash items reducing net income, and all
other non-cash items increasing net income, all of the foregoing as determined
on a consolidated basis for the Company and its subsidiaries in accordance with
GAAP. Pre-Acquisition EBITDA also includes add-backs for transaction expenses,
SAR expense and write-off of equipment which are not customary add-backs to
EBITDA. Those items are unusual and are not expected to recur in the future
(including the post-Acquisition period). Pre-Acquisition EBITDA, without these
add-backs, is $48,929.

B-1

<PAGE> 1

Exhibit 10.5

EMPLOYMENT AGREEMENT

RECITALS

A. It is the desire of the Employer to assure itself of the
management services of the Employee by directly engaging the Employee as the
Senior Vice President, Operations of the Employer.

B. The Employee desires to commit himself to serve the
Employer on the terms herein provided.

NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements set forth below the parties hereto agree as
follows:

ARTICLE I

POSITION AND TERM

1.1 POSITION. The Employer agrees to and does employ the
Employee and the Employee shall enter the employ of the Employer to perform his
duties as Senior Vice President, Operations and such other or additional
incidental or customary duties as determined by the Board of Directors of the
Employer (the "Board") or the Chief Executive Officer of the Employer (the
"CEO").

ARTICLE II

COMPENSATION

2.1 ANNUAL BASE SALARY. During the Period of Contract
Employment, the Employer agrees to pay the Employee a base salary in the annual
amount of Two Hundred and Fifty Thousand Dollars ($250,000) (the "Base
Salary"); provided, however, that the agreement as to said amount shall not
preclude or in any way affect the grant by the Employer or the receipt by the
Employee of increases in the Base Salary, or of Bonus Compensation or other
forms of additional compensation (including insurance and other employee plan
benefits), such increases, contingent or otherwise, to be determined solely in
the discretion of the Board or a committee of the Board to which such authority
is delegated by the Board, and such Bonus Compensation and additional
compensation, contingent or otherwise, to be determined in accordance with
Sections

2
<PAGE> 3
2.2 and 2.3, respectively. The Base Salary shall be payable as current salary,
in monthly installments subject to all applicable withholding and deductions,
and at the same monthly rate as adjusted for any fraction of a month unexpired
at the Termination of Contract Employment.

2.2 BONUS COMPENSATION. The Employee shall be entitled
to an annual incentive bonus to be paid at such times as the Board shall
determine and to be based upon the Employee's performance during each fiscal
year as measured by the following formula: In the event that the applicable
performance criteria (as determined by the Board) of the Employer or its
successor, shall equal the fiscal year bonus target established by the Board
(the "Bonus Target"), the Employee shall be entitled to receive a bonus payment
equal to 100% of his Base Salary. The fiscal 1995 Bonus Target is attached
hereto as Exhibit B. The bonus payment shall be decreased ratably to 50% of
Base Salary in the event that 85% of the Bonus Target is actually achieved. No
bonus shall be payable if less than 85% of the Bonus Target is actually
achieved. By way of example, if 90% of the Bonus Target is actually achieved,
then the Employee's bonus for that fiscal year shall be 67% of his Base Salary.
Bonuses to be paid hereunder shall be paid not later than ten (10) days after
the receipt of the Employer's audited financial statements.

3
<PAGE> 4
determined by the Board to be necessary to protect the Employee and the
Employer while the automobile is being operated for and on the Employer's
behalf.

ARTICLE III

TERMINATION OF CONTRACT EMPLOYMENT

(b) Death. The Employee's death; or

3.2 PERMISSIVE TERMINATION. This Agreement and the
Employee's employment hereunder may be terminated by the Employer or the
Employee, as applicable, under the following circumstances:

(a) Resignation or Retirement. The Employee may
voluntarily resign or retire upon thirty (30) days' prior written notice to the
Employer; or

(b) Without Cause. The Employer may terminate
the Employee's employment at any time upon thirty (30) days' prior written
notice to the Employee; or

4
<PAGE> 5
substantial neglect of the duties assigned to the Employee pursuant to Article
I hereof; or (vi) any significant violation of any statutory or common law duty
of loyalty to the Employer.

3.3 BENEFITS PAYABLE.

(a) The severance benefits payable to the
Employee by reason of termination of the Period of Contract Employment under
the circumstances described in Sections 3.2(a) or (b) at any time during the
first twelve (12) months following the Commencement Date shall be (1) payment
of a cash lump sum (subject to applicable withholding) equal to the
Cancellation Amount (as defined in the Cancellation and Settlement Agreement
dated as of March 21, 1995 among the Employee, the Employer and Dominick's
Supermarkets, Inc.); and (2) maintenance, at the expense of the Employer, for
the benefit of the Employee until the third anniversary of the Commencement
Date, of all group medical, dental, health, accident, disability, life
insurance and other employee health and welfare benefit plans and programs and
any other benefit plans and perquisites listed in Exhibit A attached hereto in
which the Employee participated prior to the effective date of termination of
the Period of Contract Employment, or maintenance of substantially identical
substitute benefits, which will fully extinguish obligations of the Company
under COBRA.

(b) The severance benefits payable to the
Employee by reason of termination of the Period of Contract Employment under
the circumstances described in Section 3.2(b) at any time after the first
twelve (12) months following the Commencement Date shall be: (1) payment of a
cash lump sum (subject to applicable withholding) equal to difference between
(i) the lesser of the Employee's then Base Salary or the aggregate Base Salary
the Employee would have received had he remained employed from the date of
termination until the third anniversary of the Commencement Date, discounted to
the present value at the date of payment at a rate of 10% per annum, and (ii)
the Cancellation Amount; (2) payment, on the date such sum would otherwise be
payable if the Period of Contract Employment had not been terminated, of a cash
lump sum equal to the bonus award that would have been payable under Section
2.2 hereof if the Period of Contract Employment had not been terminated before
the end of the fiscal year in which termination of the Period of Contract
Employment became effective, and determined as if the Employer achieved one
hundred percent (100%) of the Bonus Target for such fiscal year; and (3)
maintenance, at the expense of the Employer, for the benefit of the Employee
until the third anniversary of the Commencement Date, of all group medical,
dental, health, accident, disability, life insurance and other employee health
and welfare benefit plans and programs and any other benefit plans and
perquisites listed in Exhibit A attached hereto in which the Employee
participated prior to the effective date of termination of the Period of
Contract Employment, or maintenance of substantially identical substitute
benefits, which will fully extinguish obligations of the Company under COBRA.

(c) No severance benefits of any kind shall be
payable to the Employee by reason of termination of the Period of Contract
Employment under the circumstances described in Sections 3.1 or 3.2(c).

(d) Except as set forth in Section 3.3(b), upon
termination of the Period of Contract Employment, the Employee shall cease to
be entitled to receive employee benefits pursuant to Sections 2.3 and 2.5,
other than obligations of the Employer under COBRA.

5
<PAGE> 6
(e) The Employee shall not be required to
mitigate the amount of any payment or benefit provided in this Section 3.3 by
seeking other employment or otherwise, except that the Employer may suspend the
payment of benefits described in Section 2.3 hereof at such time as the
Employee becomes eligible to receive corresponding benefits from a new
employer.

ARTICLE IV

COVENANTS

6
<PAGE> 7
this provision would cause irreparable harm to the Employer and that the
Employer may seek to enjoin any such violation or to take any other applicable
action.

If the Employee shall breach the agreement contained in this
Section 4.4, such breach may render the Employee liable to the Employer for
damages therefor and entitle the Employer to enjoin the Employee from making
such investment or from rendering such personal services. In addition, the
Employer shall have the right in such event to enjoin the Employee from
disclosing any Confidential Information concerning the Employer to any
competing business, to enjoin any competing business from receiving from the
Employee or using any such Confidential Information and/or to enjoin any
competing business from retaining or seeking to retain any other employees of
the Employer.

7
<PAGE> 8
4.6 NO SOLICITATION. The Employee hereby covenants and
agrees that during the Period of Contract Employment or at any time during the
two-year period thereafter, he will not, for himself or any third party,
directly or indirectly, (i) divert or attempt to divert from the Employer any
business of any kind in which the Employer is engaged with entities which
maintained a business relationship with the Employer (or any entities which
were contacted or solicited about entering into a business relationship with
the Employer) during any period the Employee was employed by the Employer,
including, without limitation, the solicitation of the Employer's customers or
interference with any of its suppliers or customers; or (ii) employ or solicit
for employment any person employed by the Employer during the period of the
Employee's employment.

4.9 SEVERABILITY. The covenants of the Employee
contained in Article IV shall each be construed as an agreement independent of
any other provision in this Agreement, and the existence of any claim or cause
of action of the Employee against the Employer, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
the Employer of such covenants. Both parties hereby expressly agree and
contract that it is not the intention of either party to violate any public
policy, statutory or common law, and that if any portion of any sentence,
paragraph, clause, or combination of the same of this Agreement is in violation
of the law of any state where applicable, such portion of said sentence,
paragraph, clause or combination of the same shall be void in the jurisdictions
where it is unlawful, but the remainder of such sentence, paragraph, clause, or
combination of the same and this Agreement shall remain binding on the parties
to make the covenants of this Agreement binding to the full extent lawful under
existing applicable laws. In the event that any part of any covenant of this
Agreement is determined by a court of law to be overly broad thereby making the
covenant unenforceable, the parties hereto agree, and it is their desire, that
such court shall substitute the broadest judicially enforceable limitation in
its place, and that as so modified the covenant shall be binding upon the
parties as if originally set forth herein.

4.10 REMEDIES. The Employee and the Employer agree that
the Employer will be irreparably harmed by any violation or threatened
violation of any of the foregoing provisions

8
<PAGE> 9
of this Article IV if such provisions are not specifically enforced and
therefore that the Employer shall be entitled to an injunction restraining any
violation of such provisions by the Employee, or any other appropriate decree
of specific performance. Such remedies shall not be exclusive and shall be in
addition to any other remedy to which the Employer may be entitled under this
Agreement or at law.

ARTICLE V

MISCELLANEOUS

5.4 GENDER. Words in the masculine herein may be
interpreted as feminine or neuter, and words in the singular as plural, and
vice versa, where the sense requires.

9
<PAGE> 10
expired, as to that jurisdiction and subject to this Section 5.6, such clause
or provision shall be deemed eliminated from this Agreement but the remaining
provisions shall nevertheless be given full force and effect. In the event
this Agreement or any portion hereof is more restrictive than permitted by the
law of the jurisdiction in which enforcement is sought, this Agreement or such
portion shall be limited in that jurisdiction only, and shall be enforced in
that jurisdiction as so limited to the maximum extent permitted by the law of
that jurisdiction.

(a) If to the Employer, addressed to its
principal offices to the attention of the CEO and the General Counsel.

(b) If to the Employee, to him at the address set
forth below under his signature;

or at any other address as any party shall have specified by notice in writing
to the other parties.

5.9 COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original, but all
of which together will constitute one and the same Agreement.

10
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.

DOMINICK'S FINER FOODS, INC.

By: /s/ Robert A. Mariano
----------------------------------------
Name: ROBERT A. MARIANO
Title: President

/s/ Robert E. McCoy
-------------------------------------------
ROBERT E. McCOY

Address: 1815 Grant Street
Downers Grove, Ill 60515

11
<PAGE> 12
EXHIBIT A

BENEFIT PLANS

Dominick's Supermarkets, Inc. 1995 Stock Option Plan (See Annex I)

Senior Management Short Term Disability Plan (See Annex II)

Senior Management Long Term Disability Plan (See Annex III)

Senior Management Death Benefit and Capital Accumulation Plan (See Annex IV)

Senior Management Financial Planning Program (See Annex V)

A-1
<PAGE> 13
EXHIBIT B

FISCAL 1995 BONUS TARGET

<TABLE>
<CAPTION>
(dollars in thousands)
<S> <C>
Pre-Acquisition EBITDA (Periods 1-6) (1) $ 51,740
Post-Acquisition EBITDA (Periods 7-13) $ 61,484
--------

TOTAL EBITDA $113,224
========

</TABLE>

(1) "EBITDA" is defined as the net income (or loss) of the Company and its
subsidiaries on a consolidated basis, determined in accordance with GAAP,
excluding (to the extent included therein) without duplication, (i) all net
extraordinary gains (or losses), (ii) total interest expense of the Company
and its subsidiaries on a consolidated basis with respect to outstanding
indebtedness of the Company and its subsidiaries, including without limitation,
all commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing and net costs under interest
rate swap, cap, collar or similar agreements, (iii) provisions for taxes
based on income, (iv) total depreciation expense, (v) total amortization
expense, (vi) LIFO provision, and (vii) other non-cash items reducing net
income, and all other non-cash items increasing net income, all of the foregoing
as determined on a consolidated basis for the Company and its subsidiaries in
accordance with GAAP. Pre-Acquisition EBITDA also includes add-backs for
transaction expenses, SAR expense and write-off of equipment which are not
customary add-backs to EBITDA. Those items are unusual and are not expected to
recur in the future (including the post-Acquisition period). Pre-Acquisition
EBITDA, without these add-backs, is $48,929.

B-1

<PAGE> 1

Exhibit 10.6

EMPLOYMENT AGREEMENT

RECITALS

A. It is the desire of the Employer to assure itself of the
management services of the Employee by directly engaging the Employee as the
Senior Vice President, Omni Division of the Employer.

B. The Employee desires to commit himself to serve the
Employer on the terms herein provided.

NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements set forth below the parties hereto agree as
follows:

ARTICLE I

POSITION AND TERM

1.1 POSITION. The Employer agrees to and does employ the
Employee and the Employee shall enter the employ of the Employer to perform his
duties as Senior Vice President, Omni Division and such other or additional
incidental or customary duties as determined by the Board of Directors of the
Employer (the "Board") or the Chief Executive Officer of the Employer (the
"CEO").

ARTICLE II

COMPENSATION

2.1 ANNUAL BASE SALARY. During the Period of Contract
Employment, the Employer agrees to pay the Employee a base salary in the annual
amount of Two Hundred and Twenty Five Thousand Dollars ($225,000) (the "Base
Salary"); provided, however, that the agreement as to said amount shall not
preclude or in any way affect the grant by the Employer or the receipt by the
Employee of increases in the Base Salary, or of Bonus Compensation or other
forms of additional compensation (including insurance and other employee plan
benefits), such increases, contingent or otherwise, to be determined solely in
the discretion of the Board or a committee of the Board to which such authority
is delegated by the Board, and such Bonus Compensation and additional
compensation, contingent or otherwise, to be determined in

2
<PAGE> 3
accordance with Sections 2.2 and 2.3, respectively. The Base Salary shall be
payable as current salary, in monthly installments subject to all applicable
withholding and deductions, and at the same monthly rate as adjusted for any
fraction of a month unexpired at the Termination of Contract Employment.

2.2 BONUS COMPENSATION. The Employee shall be entitled
to an annual incentive bonus to be paid at such times as the Board shall
determine and to be based upon the Employee's performance during each fiscal
year as measured by the following formula: In the event that the applicable
performance criteria (as determined by the Board) of the Employer or its
successor, shall equal the fiscal year bonus target established by the Board
(the "Bonus Target"), the Employee shall be entitled to receive a bonus payment
equal to 100% of his Base Salary. The fiscal 1995 Bonus Target is attached
hereto as Exhibit B. The bonus payment shall be decreased ratably to 50% of
Base Salary in the event that 85% of the Bonus Target is actually achieved. No
bonus shall be payable if less than 85% of the Bonus Target is actually
achieved. By way of example, if 90% of the Bonus Target is actually achieved,
then the Employee's bonus for that fiscal year shall be 67% of his Base Salary.
Bonuses to be paid hereunder shall be paid not later than ten (10) days after
the receipt of the Employer's audited financial statements.

3
<PAGE> 4
determined by the Board to be necessary to protect the Employee and the
Employer while the automobile is being operated for and on the Employer's
behalf.

ARTICLE III

TERMINATION OF CONTRACT EMPLOYMENT

(b) Death. The Employee's death; or

3.2 PERMISSIVE TERMINATION. This Agreement and the
Employee's employment hereunder may be terminated by the Employer or the
Employee, as applicable, under the following circumstances:

(a) Resignation or Retirement. The Employee may
voluntarily resign or retire upon thirty (30) days' prior written notice to the
Employer; or

(b) Without Cause. The Employer may terminate
the Employee's employment at any time upon thirty (30) days' prior written
notice to the Employee; or

4
<PAGE> 5
substantial neglect of the duties assigned to the Employee pursuant to Article
I hereof; or (vi) any significant violation of any statutory or common law duty
of loyalty to the Employer.

3.3 BENEFITS PAYABLE.

(c) No severance benefits of any kind shall be
payable to the Employee by reason of termination of the Period of Contract
Employment under the circumstances described in Sections 3.1 or 3.2(c).

ARTICLE IV

COVENANTS

6
<PAGE> 7
this provision would cause irreparable harm to the Employer and that the
Employer may seek to enjoin any such violation or to take any other applicable
action.

7
<PAGE> 8
4.6 NO SOLICITATION. The Employee hereby covenants and
agrees that during the Period of Contract Employment or at any time during the
two-year period thereafter, he will not, for himself or any third party,
directly or indirectly, (i) divert or attempt to divert from the Employer any
business of any kind in which the Employer is engaged with entities which
maintained a business relationship with the Employer (or which were contacted
or solicited about entering into a business relationship with the Employer)
during any period the Employee was employed by the Employer, including, without
limitation, the solicitation of the Employer's customers or interference with
any of its suppliers or customers; or (ii) employ or solicit for employment any
person employed by the Employer during the period of the Employee's employment.

4.10 REMEDIES. The Employee and the Employer agree that
the Employer will be irreparably harmed by any violation or threatened
violation of any of the foregoing provisions

ARTICLE V

MISCELLANEOUS

5.4 GENDER. Words in the masculine herein may be
interpreted as feminine or neuter, and words in the singular as plural, and
vice versa, where the sense requires.

(a) If to the Employer, addressed to its
principal offices to the attention of the CEO and the General Counsel.

(b) If to the Employee, to him at the address set
forth below under his signature;

or at any other address as any party shall have specified by notice in writing
to the other parties.

5.9 COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original, but all
of which together will constitute one and the same Agreement.

10
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.

DOMINICK'S FINER FOODS, INC.

By: /s/ Robert A. Mariano
----------------------------------------
Name: ROBERT A. MARIANO
Title: President

/s/ Herbert R. Young
-------------------------------------------
HERBERT R. YOUNG

Address:

11
<PAGE> 12
EXHIBIT A

BENEFIT PLANS

Dominick's Supermarkets, Inc. 1995 Stock Option Plan (See Annex I)

Senior Management Short Term Disability Plan (See Annex II)

Senior Management Long Term Disability Plan (See Annex III)

Senior Management Death Benefit and Capital Accumulation Plan (See Annex IV)

Senior Management Financial Planning Program (See Annex V)

A-1
<PAGE> 13
EXHIBIT B

FISCAL 1995 BONUS TARGET

<TABLE>
<CAPTION>
(dollars in thousands)
<S> <C>
Pre-Acquisition EBITDA (Periods 1-6) (1) $ 51,740
Post-Acquisition EBITDA (Periods 7-13) $ 61,484
-------

TOTAL EBITDA $113,224
=======
</TABLE>

(1) "EBITDA" is defined as the net income (or loss) of the Company and its
subsidiaries on a consolidated basis, determined in accordance with GAAP,
excluding (to the extent included therein) without duplication, (i) all net
extraordinary gains (or losses), (ii) total interest expense of the Company and
its subsidiaries on a consolidated basis with respect to outstanding
indebtedness of the Company and its subsidiaries, including without limitation,
all commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing and net costs under
interest rate swap, cap, collar or similar agreements, (iii) provisions for
taxes based on income, (iv) total depreciation expense, (v) total amortization
expense, (vi) LIFO provision, and (vii) other non-cash items reducing net
income, and all other non-cash items increasing net income, all of the
foregoing as determined on a consolidated basis for the Company and its
subsidiaries in accordance with GAAP. Pre-Acquisition EBITDA also includes
add-backs for transaction expenses, SAR expense and write-off of equipment
which are not customary add-backs to EBITDA. Those items are unusual and are
not expected to recur in the future (including the post-Acquisition period).
Pre-Acquisition EBITDA, without these add-backs, is $48,929.

B-1

<PAGE> 1
EXHIBIT 10.10

DOMINICK'S SUPERMARKETS, INC.

1995 STOCK OPTION PLAN

AS ADOPTED MARCH 19, 1995

<PAGE> 2

TABLE OF CONTENTS

Page
----
1. PURPOSE OF PLAN; ADMINISTRATION . . . . . . . . . . . . . . . . . 1

1.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Administration . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Participation . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Stock Subject to the Plan . . . . . . . . . . . . . . . . . . 2

2. STOCK OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2.1 Option Price . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Option Period . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Exercise of Options . . . . . . . . . . . . . . . . . . . . . 4
2.4 Transferability of Options . . . . . . . . . . . . . . . . . 5
2.5 Limitation on Exercise of Incentive Stock Options . . . . . . 5
2.6 Disqualifying Dispositions of Incentive Stock Options . . . . 5
2.8 No Affect on Employment . . . . . . . . . . . . . . . . . . . 6
2.9 Conditions to Issuance of Stock Certificates . . . . . . . . 6

3. OTHER PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 7

3.1 Sick Leave and Leaves of Absence . . . . . . . . . . . . . . 7
3.2 Termination of Employment. . . . . . . . . . . . . . . . . . 7
3.3 Issuance of Stock Certificates . . . . . . . . . . . . . . . 7
3.4 Terms and Conditions of Options and Restricted Stock . . . . 8
3.5 Adjustments Upon Changes in Capitalization; Merger and
Consolidation . . . . . . . . . . . . . . . . . . . . . . . . 8
3.6 Rights of Participants and Beneficiaries . . . . . . . . . . 9
3.7 Government Regulations . . . . . . . . . . . . . . . . . . . 9
3.8 Amendment and Termination . . . . . . . . . . . . . . . . . . 9
3.9 Time of Grant and Exercise of Options . . . . . . . . . . . . 10
3.10 Privileges of Stock Ownership; Non-Distributive Intent;
Reports to Option Holders . . . . . . . . . . . . . . . . . . 10
3.11 Legending Share Certificates . . . . . . . . . . . . . . . . 10
3.12 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 11
3.13 Changes in Capital Structure; No Impediment to Corporate
Transactions . . . . . . . . . . . . . . . . . . . . . . . . 11
3.14 Effective Date of the Plan . . . . . . . . . . . . . . . . . 11
3.15 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.16 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 11
3.17 Effect of Plan Upon Options and Compensation Plans . . . . . 11

i
<PAGE> 3

1. PURPOSE OF PLAN; ADMINISTRATION

1.1 PURPOSE.

The Dominick's Supermarkets, Inc. 1995 Stock Option Plan (hereinafter,
the "Plan") is hereby established to grant to officers and other key employees
of Dominick's Supermarkets, Inc. ("Supermarkets") or of its parent or
subsidiaries (as defined in Sections 424(e) and (f), respectively, of the
Internal Revenue Code of 1986, as amended (the "Code")), if any (individually
and collectively, the "Company"), a favorable opportunity to acquire Class A
Common Stock, $.01 par value ("Common Stock"), of Supermarkets and, thereby, to
create an incentive for such persons to remain in the employ of or provide
services to the Company and to contribute to its success.

The Company may grant under the Plan both incentive stock options
within the meaning of Section 422 of the Code ("Incentive Stock Options") and
stock options that do not qualify for treatment as Incentive Stock Options
("Nonstatutory Options"). Unless expressly provided to the contrary herein,
all references herein to "options" shall include both Incentive Stock Options
and Nonstatutory Options.

1.2 ADMINISTRATION.

The Plan shall be administered by a committee (the "Committee"), which
shall consist of two or more non-employee members of the Board of Directors of
Supermarkets (the "Board") designated from time to time by the Board; provided,
however, that each such member shall be a "disinterested person" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended
("Rule 16b-3"). Appointment of Committee members shall be effective upon
acceptance of appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the Committee may be
filled by the Board.

A majority of the members of the Committee shall constitute a quorum
for the purposes of the Plan. Provided a quorum is present, the Committee may
take action by affirmative vote or consent of a majority of its members present
at a meeting. Meetings may be held telephonically as long as all members are
able to hear one another, and a member of the Committee shall be deemed to be
present for this purpose if he or she is in simultaneous communication by
telephone with the other members who are able to hear one another. In lieu of
action at a meeting, the Committee may act by written consent of a majority of
its members.

Subject to the express provisions of the Plan, the Committee shall
have the authority to construe and interpret the Plan and all Stock Option
Agreements entered into pursuant hereto and to define the terms used therein,
to prescribe, adopt, amend and rescind rules and regulations relating to the
administration of the Plan and to make all other determinations necessary or
advisable for the administration of the Plan; provided, however, that the
Committee may delegate nondiscretionary administrative duties to such employees
of the Company as it deems proper except with respect to matters which under
Rule 16b-3 are required to be determined in the sole discretion of the
Committee; and, provided, further, in its absolute discretion, the Board may at
any time and from time to time exercise any and all rights and duties of the
Committee under the Plan except with respect to matters which under Rule 16b-3
are required to be determined in the sole discretion of the Committee. Subject
to

1
<PAGE> 4

the express limitations of the Plan, the Committee shall designate the
individuals from among the class of persons eligible to participate as provided
in Section 1.3 who shall receive options, whether an optionee will receive
Incentive Stock Options or Nonstatutory Options, or both, and the amount,
price, restrictions and all other terms and provisions of such options (which
need not be identical).

Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with the
administration of this Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and the
Company's officers and directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. No members of the Committee or
Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan, options and all
members of the Committee shall be fully protected by the Company in respect of
any such action, determination or interpretation.

1.3 PARTICIPATION.

Officers and other key employees of the Company shall be eligible for
selection to participate in the Plan upon approval by the Committee. An
individual who has been granted an option may, if otherwise eligible, be
granted additional options if the Committee shall so determine. No person is
eligible to participate in the Plan by matter of right; only those eligible
persons who are selected by the Committee in its discretion shall participate
in the Plan.

1.4 STOCK SUBJECT TO THE PLAN.

Subject to adjustment as provided in Section 3.5, the stock to be
offered under the Plan shall be shares of authorized but unissued Common Stock,
including any shares repurchased under the terms of the Plan or any Stock
Option Agreement (as defined in Section 3.4) entered into pursuant hereto. The
cumulative aggregate number of shares of Common Stock to be issued under the
Plan shall not exceed 76,250, subject to adjustment as set forth in Section
3.5.

If any option granted hereunder shall expire or terminate for any
reason without having been fully exercised, the unpurchased shares subject
thereto shall again be available for the purposes of the Plan. For purposes of
this Section 1.4, where the exercise price of options is paid by means of the
grantee's surrender of previously owned shares of Common Stock, only the net
number of additional shares issued and which remain outstanding in connection
with such exercise shall be deemed "issued" for purposes of the Plan.

2. STOCK OPTIONS

2.1 OPTION PRICE.

The exercise price of each Incentive Stock Option granted under the
Plan shall be determined by the Committee, but shall not be less than 100% of
the "Fair Market Value" (as defined below) of Common Stock on the date of
grant. If an Incentive Stock Option is granted to an employee who at the time
such option is granted owns (within the meaning of Section

2
<PAGE> 5

424(d) of the Code) more than 10% of the total combined voting power of all
classes of capital stock of the Company, the option exercise price shall be at
least 110% of the Fair Market Value of Common Stock on the date of grant. The
exercise price of each Nonstatutory Option shall be any amount determined by
the Committee in its discretion, with or without reference to the Fair Market
Value of Common Stock. The status of each option granted under the Plan as
either an Incentive Stock Option or a Nonstatutory Stock Option shall be
determined by the Committee at the time the Committee acts to grant the option,
and shall be clearly identified as such in the Stock Option Agreement relating
thereto.

"Fair Market Value" for purposes of the Plan shall mean: (i) the
closing price of a share of Common Stock on the principal exchange on which
shares of Common Stock are then trading, if any, on the day previous to such
date, or, if shares were not traded on the day previous to such date, then on
the next preceding trading day during which a sale occurred; or (ii) if Common
Stock is not traded on an exchange but is quoted on NASDAQ or a successor
quotation system, (1) the last sales price (if Common Stock is then listed on
the Nasdaq Stock Market) or (2) the mean between the closing representative bid
and asked price (in all other cases) for Common Stock on the day prior to such
date as reported by NASDAQ or such successor quotation system; or (iii) if
there is no listing or trading of Common Stock either on a national exchange or
over-the-counter, that price determined in good faith by the Committee to be
the fair value per share of Common Stock, based upon such evidence as it deems
necessary or advisable.

In the discretion of the Committee exercised at the time the option is
exercised, the exercise price of any option granted under the Plan shall be
paid in full in cash, by check or by the optionee's interest-bearing full
recourse promissory note (subject to any limitations of applicable state
corporations law) delivered at the time of exercise; provided, however, that
subject to the timing requirements of Section 2.7, in the discretion of the
Committee and upon receipt of all regulatory approvals, the person exercising
the option may deliver as payment in whole or in part of such exercise price
certificates for Common Stock of the Company (duly endorsed or with duly
executed stock powers attached), which shall be valued at its Fair Market Value
on the day of exercise of the option, or other property deemed appropriate by
the Committee; and, provided further, that subject to Section 422 of the Code
so-called cashless exercises as permitted under applicable rules and
regulations of the Securities and Exchange Commission and the Federal Reserve
Board shall be permitted in the discretion of the Committee. Without limiting
the Committee's discretion in this regard, so-called pyramiding, or consecutive
book entry stock-for-stock exercises of options, also is permitted in the
Committee's discretion.

Irrespective of the form of payment, the delivery of shares pursuant
to the exercise of an option shall be conditioned upon payment by the optionee
to the Company of amounts sufficient to enable the Company to pay all federal,
state, and local withholding taxes applicable, in the Company's judgment, to
the exercise. In the discretion of the Committee, such payment to the Company
may be effected through (i) the Company's withholding from the number of shares
of Common Stock that would otherwise be delivered to the optionee by the
Company on exercise of the option a number of shares of Common Stock equal in
value (as determined by the Fair Market Value of Common Stock on the date of
exercise) to the aggregate withholding taxes, (ii) payment by the optionee to
the Company of the aggregate withholding taxes in cash, (iii) withholding by
the Company from other amounts contempora-

3
<PAGE> 6

neously owed by the Company to the optionee, or (iv) any combination of these
three methods, as determined by the Committee in its discretion.

2.2 OPTION PERIOD.

(a) Each option and all rights or obligations thereunder
shall expire on such date as the Committee shall determine as set forth in the
Stock Option Agreement, but in no event shall any option granted hereunder
expire prior to the first to occur of the following events:

(i) Except as required by Section 422(c)(6) of
the Code, the expiration of ten years from the date the option was granted; or

(ii) Except in the case of any optionee who is
disabled (within the meaning of Section 22(e)(3) of the Code), the expiration
of three months from the date of the optionee's Termination of Employment (as
defined in Section 3.2) for any reason other than such optionee's death unless
the optionee dies within said three-month period; or

(iii) In the case of an optionee who is disabled
(within the meaning of Section 22(e)(3) of the Code), the expiration of six
months from the date of the Optionee's Termination of Employment by reason of
such disability, unless the Optionee dies within said six-month period; or

(iv) The expiration of six months from the date of
the optionee's death.

(b) Subject to the provisions of Section 2.2(a), the
Committee shall provide, in the terms of each Stock Option Agreement, when the
option subject to such agreement expires and becomes unexercisable; and
(without limiting the generality of the foregoing) the Committee may provide in
the Stock Option Agreement that the option subject thereto expires 30 days
following a Termination of Employment for any reason other than death or
disability or six months following a Termination of Employment for disability
or following an optionee's death.

(c) Outside Date for Exercise. Notwithstanding any
provision of this Section 2.2, in no event shall any option granted under the
Plan be exercised after the expiration date of such option set forth in the
applicable Stock Option Agreement.

2.3 EXERCISE OF OPTIONS.

Each option granted under the Plan shall become exercisable and the
total number of shares subject thereto shall be purchasable, in a lump sum or
in such installments, which need not be equal, as the Committee shall
determine; provided, however, that each option shall become exercisable in full
no later than five years after such option is granted, and each option shall
become exercisable as to at least 20% of the shares of Common Stock covered
thereby on each anniversary of the date such option is granted; and provided,
further, that if the holder of an option shall not in any given installment
period purchase all of the shares which such holder is entitled to purchase in
such installment period, such holder's right to purchase any shares not

4
<PAGE> 7

purchased in such installment period shall continue until the expiration or
sooner termination of such holder's option. The Committee may, at any time
after grant of the option and from time to time, increase the number of shares
purchasable in any installment, subject to the total number of shares subject
to the option and the limitations set forth in Section 2.5. At any time and
from time to time prior to the time when any exercisable option or exercisable
portion thereof becomes unexercisable under the Plan or the applicable Stock
Option Agreement, such option or portion thereof may be exercised in whole or
in part; provided, however, that the Committee may, by the terms of the option,
require any partial exercise to be with respect to a specified minimum number
of shares. No option or installment thereof shall be exercisable except with
respect to whole shares. Fractional share interests shall be disregarded,
except that they may be accumulated as provided above and except that if such a
fractional share interest constitutes the total shares of Common Stock
remaining available for purchase under an option at the time of exercise, the
optionee shall be entitled to receive on exercise a certified or bank cashier's
check in an amount equal to the Fair Market Value of such fractional share of
stock.

2.4 TRANSFERABILITY OF OPTIONS.

An option granted under the Plan shall, by its terms, be
non-transferable by the optionee other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order (as defined by
the Code or Title 1 of the Employee Retirement Income Security Act, or the
rules thereunder), and shall be exercisable during the optionee's lifetime only
by the optionee or by his or her guardian or legal representative. More
particularly, but without limiting the generality of the immediately preceding
sentence, an option may not be assigned, transferred (except as provided in the
preceding sentence), pledged or hypothecated (whether by operation of law or
otherwise), and shall not be subject to execution, attachment or similar
process. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of any option contrary to the provisions of the Plan and the
applicable Stock Option Agreement, and any levy of any attachment or similar
process upon an option, shall be null and void, and otherwise without effect,
and the Committee may, in its sole discretion, upon the happening of any such
event, terminate such option forthwith.

2.5 LIMITATION ON EXERCISE OF INCENTIVE STOCK OPTIONS.

To the extent that the aggregate Fair Market Value (determined at the
time an option is granted) of the Common Stock with respect to which Incentive
Stock Options granted hereunder (and under all other incentive stock option
plans of the Company) are exercisable for the first time by an optionee in any
calendar year under the Plan exceeds $100,000, such options granted hereunder
shall be treated as Nonstatutory Options to the extent required by Section 422
of the Code. The rule set forth in the preceding sentence shall be applied by
taking options into account in the order in which they were granted.

2.6 DISQUALIFYING DISPOSITIONS OF INCENTIVE STOCK OPTIONS.

If Common Stock acquired upon exercise of any Incentive Stock Option
is disposed of in a disposition that, under Section 422 of the Code,
disqualifies the option holder from the application of Section 421(a) of the
Code, the holder of the Common Stock immediately before the disposition shall
comply with any requirements imposed by the Company in order to enable the
Company to secure the related income tax deduction to which it is entitled in
such event.

5
<PAGE> 8

2.7 CERTAIN TIMING REQUIREMENTS.

At the discretion of the Committee, shares of Common Stock issuable to
the optionee upon exercise of an option may be used to satisfy the option
exercise price or the tax withholding consequences of such exercise, in the
case of persons subject to Section 16 of the Securities Exchange Act of 1934,
as amended, only (i) during the period beginning on the third business day
following the date of release of the quarterly or annual summary statement of
sales and earnings of the Company and ending on the twelfth business day
following such date or (ii) pursuant to an irrevocable written election by the
optionee to use shares of Common Stock issuable to the optionee upon exercise
of the option to pay all or part of the option price or the withholding taxes
made at least six months prior to the payment of such option price or
withholding taxes.

2.8 NO AFFECT ON EMPLOYMENT.

Nothing in the Plan or in any Stock Option Agreement hereunder shall
confer upon any optionee any right to continue in the employ of Supermarkets,
any Parent Corporation or any Subsidiary or shall interfere with or restrict in
any way the rights, if any, of Supermarkets, any Parent Corporation or any
Subsidiary, which are hereby expressly reserved, to discharge any optionee at
any time for any reason whatsoever, with or without cause, subject to the terms
of any employment agreement.

For purposes of the Plan, "Parent Corporation" shall mean any
corporation in an unbroken chain of corporations ending with the Company if
each of the corporations other than the Company then owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain. For purposes of the Plan, "Subsidiary"
shall mean any corporation in an unbroken chain of corporations beginning with
the Company if each of the corporations other than the last corporation in the
unbroken chain then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.

2.9 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES.

The Company shall not be required to issue or deliver any certificate
or certificates for shares of Common Stock purchased upon the exercise of any
option or portion thereof prior to fulfillment of all of the following
conditions:

(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;

(b) The completion of any registration or other
qualification of such shares under any state or federal law, or under the
rulings or regulations of the Securities and Exchange Commission or any other
governmental regulatory body which the Committee or Board shall, in its
absolute discretion, deem necessary or advisable;

(c) The obtaining of any approval or other clearance from
any state or federal governmental agency which the Committee or Board shall, in
its absolute discretion, determine to be necessary or advisable;

6
<PAGE> 9

(d) The lapse of such reasonable period of time following
the exercise of the option as the Committee or Board may establish from time to
time solely for reasons of administrative convenience; and

(e) The receipt by the Company of full payment for such
shares, including payment of any applicable withholding tax.

3. OTHER PROVISIONS

3.1 SICK LEAVE AND LEAVES OF ABSENCE.

Unless otherwise provided in the Stock Option Agreement, and to the extent
permitted by Section 422 of the Code, an optionee's employment shall not be
deemed to terminate by reason of sick leave, military leave or other leave of
absence approved by the Company if the period of any such leave does not exceed
a period approved by the Company, or, if longer, if the optionee's right to
reemployment by the Company is guaranteed either contractually or by statute.
A Stock Option Agreement may contain such additional or different provisions
with respect to leave of absence as the Committee may approve, either at the
time of grant of an option or at a later time.

3.2 TERMINATION OF EMPLOYMENT.

For purposes of the Plan, "Termination of Employment" shall mean the time
when the employee-employer relationship between the optionee and Supermarkets,
any Subsidiary or any Parent Corporation is terminated for any reason,
including, but not by way of limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding (i) terminations
where there is a simultaneous reemployment or continuing employment of an
optionee by Supermarkets, any Subsidiary or any Parent Corporation, (ii) at the
discretion of the Committee, terminations which result in a temporary severance
of the employee-employer relationship, and (iii) at the discretion of the
Committee, terminations which are followed by the simultaneous establishment of
a consulting relationship by Supermarkets, a Subsidiary or any Parent
Corporation with the former employee. Subject to Section 3.1, the Committee,
in its absolute discretion, shall determine the affect of all matters and
questions relating to Termination of Employment; provided, however, that, with
respect to Incentive Stock Options, a leave of absence or other change in the
employee-employer relationship shall constitute a Termination of Employment if,
and to the extent that, such leave of absence or other change interrupts
employment for the purposes of Section 422(a)(2) of the Code and the
then-applicable regulations and revenue rulings under said Section.

3.3 ISSUANCE OF STOCK CERTIFICATES.

Upon exercise of an option, the Company shall deliver to the person
exercising such option a stock certificate evidencing the shares of Common
Stock acquired upon exercise. Notwithstanding the foregoing, the Committee in
its discretion may require the Company to retain possession of any certificate
evidencing stock acquired upon exercise of an option which remains subject to
repurchase under the provisions of the Stock Option Agreement or any other
agreement signed by the optionee in order to facilitate such repurchase
provisions.

7
<PAGE> 10

3.4 TERMS AND CONDITIONS OF OPTIONS AND RESTRICTED STOCK.

Each option granted under the Plan shall be evidenced by a written Stock
Option Agreement ("Stock Option Agreement") between the option holder and the
Company providing that the option is subject to the terms and conditions of the
Plan and to such other terms and conditions not inconsistent therewith as the
Committee may deem appropriate in each case.

3.5 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; MERGER AND
CONSOLIDATION.

If the outstanding shares of Common Stock are changed into, or exchanged
for cash or a different number or kind of shares or securities of the Company
or of another corporation through reorganization, merger, recapitalization,
reclassification, stock split-up, reverse stock split, stock dividend, stock
consolidation, stock combination, stock reclassification or similar
transaction, an appropriate adjustment shall be made by the Committee in the
number and kind of shares as to which options may be granted. In the event of
such a change or exchange, other than for shares or securities of another
corporation or by reason of reorganization, the Committee shall also make a
corresponding adjustment changing the number or kind of shares and the exercise
price per share allocated to unexercised options or portions thereof, which
shall have been granted prior to any such change, shall likewise be made. Any
such adjustment, however, shall be made without change in the total price
applicable to the unexercised portion of the option but with a corresponding
adjustment in the price for each share (except for any change in the aggregate
price resulting from rounding-off of share quantities or prices).

In the event of a "spin-off" or other substantial distribution of assets
of the Company which has a material diminutive effect upon the Fair Market
Value of the Common Stock, the Committee shall make such an adjustment to the
exercise prices of options then outstanding under the Plan as the Committee
determines, in its discretion, is appropriate and equitable to reflect such
diminution.

Where an adjustment under this Section 3.5 of the type described above is
made to an Incentive Stock Option, the adjustment will be made in a manner
which will not be considered a "modification" under the provisions of
subsection 424(b)(3) of the Code.

In connection with the dissolution or liquidation of Supermarkets or a
partial liquidation involving 50% or more of the assets of Supermarkets, a
reorganization of Supermarkets in which another entity is the survivor, a
merger or reorganization of Supermarkets under which more than 50% of the
Common Stock outstanding prior to the merger or reorganization is converted
into cash or into another security, a sale of more than 50% of the Company's
assets, or a similar event that the Committee determines, in its discretion,
would materially alter the structure of Supermarkets or its ownership, the
Committee, upon 30 days prior written notice to the option holders, may, in its
discretion, do one or more of the following: (i) shorten the period during
which options are exercisable (provided they remain exercisable for at least 30
days after the date the notice is given); (ii) accelerate any vesting schedule
to which an option is subject; (iii) arrange to have the surviving or successor
entity grant replacement options with appropriate adjustments in the number and
kind of securities and option prices; or (iv) cancel options upon payment to
the option holders in cash, with respect to each option to the extent then
exercisable (including any options as to which the exercise has been
accelerated as contemplated in clause (ii) above), of any amount that is the
equivalent of the Fair Market

8
<PAGE> 11

Value of the Common Stock (at the effective time of the dissolution,
liquidation, merger, reorganization, sale of other event) or the fair market
value of the option. In the case of a change in corporate control, the
Committee may, in considering the advisability or the terms and conditions of
any acceleration of the exercisability of any option pursuant to this Section
3.5, take into account the penalties that may result directly or indirectly
from such acceleration to either the Company or the option holder, or both,
under Section 280G of the Code, and may decide to limit such acceleration to
the extent necessary to avoid or mitigate such penalties or their effects.

No fractional share of Common Stock shall be issued under the Plan on
account of any adjustment under this Section 3.5.

3.6 RIGHTS OF PARTICIPANTS AND BENEFICIARIES.

The Company shall pay all amounts payable hereunder only to the optionee
holder or beneficiaries entitled thereto pursuant to the Plan. The Company
shall not be liable for the debts, contracts or engagements of any optionee or
his or her beneficiaries, and rights to cash payments under the Plan may not be
taken in execution by attachment or garnishment, or by any other legal or
equitable proceeding while in the hands of the Company.

3.7 GOVERNMENT REGULATIONS.

The Plan, and the grant and exercise of options and the issuance and
delivery of shares of Common Stock under Options granted hereunder, shall be
subject to compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal securities law) and
federal margin requirements and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
the Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable
to assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan and options granted hereunder shall be
deemed amended to the extent necessary to conform to such laws, rules and
regulations.

3.8 AMENDMENT AND TERMINATION.

The Board or the Committee may at any time suspend, amend or terminate the
Plan and may, with the consent of the option holder, make such modifications of
the terms and conditions of such option holder's option as it shall deem
advisable; provided, however, that, without approval of the Company's
stockholders given within twelve months before or after the action by the
Committee, no action of the Committee may, except as provided in Section 3.5,
increase any limit imposed in Section 1.4 on the maximum number of shares which
may be issued on exercise of options, materially modify the eligibility
requirements of Section 1.3, reduce the minimum stock option exercise price
requirements of Section 2.1, extend the limit imposed in this Section 3.8 on
the period during which options may be granted or amend or modify the Plan in a
manner requiring stockholder approval under Rule 16b-3. The amendment,
suspension or termination of the Plan shall not, without the consent of the
option holder affected thereby, alter or impair any rights or obligations under
any option theretofore granted under the

9
<PAGE> 12

Plan. No option may be granted during any period of suspension nor after
termination of the Plan, and in no event may any option be granted under the
Plan after the expiration of ten years from the date the Plan is adopted by the
Board.

3.9 TIME OF GRANT AND EXERCISE OF OPTIONS.

An option shall be deemed to be exercised when the Secretary of the
Company receives written notice from an option holder of such exercise, payment
of the purchase price determined pursuant to Section 2.1 of the Plan and set
forth in the Stock Option Agreement, and all representations, indemnifications
and documents reasonably requested by the Committee.

3.10 PRIVILEGES OF STOCK OWNERSHIP; NON-DISTRIBUTIVE INTENT; REPORTS TO
OPTION HOLDERS.

A participant in the Plan shall not be entitled to the privilege of stock
ownership as to any shares of Common Stock not actually issued to him. Upon
exercise of an option at a time when there is not in effect under the
Securities Act of 1933, as amended, a Registration Statement relating to the
Common Stock issuable upon exercise or payment therefor and available for
delivery a Prospectus meeting the requirements of Section 10(a)(3) of said Act,
the optionee shall represent and warrant in writing to the Company that the
shares purchased are being acquired for investment and not with a view to the
distribution thereof. No shares shall be issued upon the exercise of any
option unless and until there shall have been full compliance with any
then-applicable requirements of the Securities and Exchange Commission and
other regulatory agencies having jurisdiction, and any exchanges upon which the
Common Stock may be listed.

The Company shall furnish to each optionee under the Plan the Company's
annual report and such other periodic reports, if any, as are disseminated by
the Company in the ordinary course to its stockholders.

3.11 LEGENDING SHARE CERTIFICATES.

In order to enforce any restrictions imposed upon Common Stock issued upon
exercise of an option granted under the Plan or to which such Common Stock may
be subject, the Committee may cause a legend or legends to be placed on any
share certificates representing such Common Stock, which legend or legends
shall make appropriate reference to such restrictions, including, but not
limited to, a restriction against sale of such Common Stock for any period of
time as may be required by applicable laws or regulations. If any restriction
with respect to which a legend was placed on any certificate ceases to apply to
Common Stock represented by such certificate, the owner of the Common Stock
represented by such certificate may require the Company to cause the issuance
of a new certificate not bearing the legend.

Additionally, and not by way of limitation, the Committee may impose such
restrictions on any Common Stock issued pursuant to the Plan as it may deem
advisable, including, without limitation, restrictions under the requirements
of any stock exchange upon which Common Stock is then traded.

10
<PAGE> 13

3.12 USE OF PROCEEDS.

Proceeds realized pursuant to the exercise of options under the Plan shall
constitute general funds of the Company.

3.13 CHANGES IN CAPITAL STRUCTURE; NO IMPEDIMENT TO CORPORATE
TRANSACTIONS.

The existence of outstanding options under the Plan shall not affect the
Company's right to effect adjustments, recapitalizations, reorganizations or
other changes in its or any other corporation's capital structure or business,
any merger or consolidation, any issuance of bonds, debentures, preferred or
prior preference stock ahead of or affecting Common Stock, the dissolution or
liquidation of the Company's or any other corporation's assets or business, or
any other corporate act, whether similar to the events described above or
otherwise.

3.14 EFFECTIVE DATE OF THE PLAN.

The Plan shall be effective as of the date of its approval by the
stockholders of Supermarkets within twelve months after the date of the Board's
initial adoption of the Plan. Options may be granted but not exercised prior
to stockholder approval of the Plan. If any options are so granted and
stockholder approval shall not have been obtained within twelve months of the
date of adoption of this Plan by the Board of Directors, such options shall
terminate retroactively as of the date they were granted.

3.15 TERMINATION.

The Plan shall terminate automatically as of the close of business on the
day preceding the tenth anniversary date of its adoption by the Board or
earlier as provided in Section 3.8. Unless otherwise provided herein, the
termination of the Plan shall not affect the validity of any Stock Option
Agreement outstanding at the date of such termination.

3.16 GOVERNING LAW.

The Plan shall be governed by, and construed in accordance with the laws
of the State of Illinois (without giving effect to conflicts of law
principles).

3.17 EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS.

The adoption of the Plan shall not affect any other compensation or
incentive plans in effect for the Company. Nothing in the Plan shall be
construed to limit the right of the Company (i) to establish any other forms of
incentives or compensation for employees of the Company or (ii) to grant or
assume options or other rights otherwise than under the Plan in connection with
any proper corporate purpose including but not by way of limitation, the grant
or assumption of options in connection with the acquisition by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, partnership, firm or association.

* * *

<PAGE> 1
EXHIBIT 10.11

DOMINICK'S FINER FOODS, INC.,
as Issuer,

AND

THE SUBSIDIARY GUARANTORS
named herein,

AND

United States Trust Company of New York,
as Trustee

_________________

INDENTURE

Dated as of May 4, 1995

________________

$200,000,000

10 7/8% Senior Subordinated Notes
due 2005

and
Series B 10 7/8% Senior Subordinated Notes due 2005
<PAGE> 2
CROSS-REFERENCE TABLE

<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ----------- ----------
<S> <C>
310(a)(1)........................8.10
(a)(2)........................8.10
(a)(3)........................N.A.
(a)(4)........................N.A.
(a)(5)........................8.10; 8.11
(b)...........................8.08; 8.10;
13.02
(c)...........................N.A.
311(a)...........................8.11
(b)...........................8.11
(c)...........................N.A.
312(a)...........................2.05
(b)...........................13.03
(c)...........................13.03
313(a)...........................8.06
(b)(1)........................N.A.
(b)(2)........................8.06
(c)...........................8.06; 13.02
(d)...........................8.06
314(a)...........................5.07; 5.09;
13.02
(b)...........................N.A.
(c)(1)........................8.02; 13.04
(c)(2)........................8.02; 13.04
(c)(3)........................N.A.
(d)...........................N.A.
(e)...........................13.05
(f)...........................N.A.
315(a)...........................8.01(b)
(b)...........................8.05; 13.02
(c)...........................8.01(a)
(d)...........................8.01(c)
(e)...........................7.11
316(a)(last sentence)............2.09
(a)(1)(A).....................7.05
(a)(1)(B).....................7.04
(a)(2)........................N.A.
(b)...........................7.07
317(a)(1)........................7.08
(a)(2)........................7.09
(b)...........................2.04
318(a)...........................13.01
(c)...........................13.01
</TABLE>
______________________

N.A. means Not Applicable

NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS

ARTICLE ONE

DEFINITIONS AND INCORPORATION BY REFERENCE

Page

Section 1.01 Definitions........................................... 1
Section 1.02 Incorporation by Reference of TIA..................... 32
Section 1.03 Rules of Construction................................. 32

ARTICLE TWO

THE SECURITIES

Section 2.01 Form and Dating....................................... 33
Section 2.02 Execution and Authentication.......................... 34
Section 2.03 Registrar and Paying Agent............................ 35
Section 2.04 Paying Agent to Hold Assets in Trust.................. 36
Section 2.05 Securityholder Lists.................................. 36
Section 2.06 Transfer and Exchange................................. 37
Section 2.07 Replacement Securities................................ 37
Section 2.08 Outstanding Securities................................ 38
Section 2.09 Treasury Securities................................... 38
Section 2.10 Temporary Securities.................................. 39
Section 2.11 Cancellation.......................................... 39
Section 2.12 Defaulted Interest.................................... 39
Section 2.13 CUSIP Number.......................................... 40
Section 2.14 Restrictive Legends................................... 40
Section 2.15 Book-Entry Provisions for Global Security............. 42
Section 2.16 Special Transfer Provisions........................... 43

ARTICLE THREE

REDEMPTION

Section 3.01 Notices to Trustee.................................... 46
Section 3.02 Selection of Securities to Be Redeemed................ 46
Section 3.03 Notice of Redemption.................................. 47
Section 3.04 Effect of Notice of Redemption........................ 48
Section 3.05 Deposit of Redemption Price........................... 48
Section 3.06 Securities Redeemed in Part........................... 49

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<PAGE> 4
ARTICLE FOUR

SUBORDINATION
Page
Section 4.01 Securities Subordinated to Senior
Indebtedness....................................... 49
Section 4.02 Suspension of Payment When Senior
Indebtedness in Default............................ 49
Section 4.03 Securities Subordinated to Prior Payment
of All Senior Indebtedness on Dissolution,
Liquidation or Reorganization of Company........... 51
Section 4.04 Securityholders to Be Subrogated to Rights
of Holders of Senior Indebtedness.................. 53
Section 4.05 Obligations of the Company Unconditional.............. 54
Section 4.06 Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice.................... 54
Section 4.07 Application by Trustee of Assets Deposited
with It............................................ 55
Section 4.08 No Waiver of Subordination Provisions................. 55
Section 4.09 Securityholders Authorize Trustee to
Effectuate Subordination of Securities............. 56
Section 4.10 Right of Trustee to Hold Senior
Indebtedness....................................... 57
Section 4.11 No Suspension of Remedies............................. 57
Section 4.12 No Fiduciary Duty of Trustee to Holders of
Senior Indebtedness................................ 57

ARTICLE FIVE

COVENANTS

Section 5.01 Payment of Securities................................. 58
Section 5.02 Maintenance of Office or Agency....................... 58
Section 5.03 Limitation on Restricted Payments..................... 58
Section 5.04 Corporate Existence................................... 60
Section 5.05 Payment of Taxes and Other Claims..................... 60
Section 5.06 Maintenance of Properties and Insurance............... 61
Section 5.07 Compliance Certificate; Notice of Default............. 62
Section 5.08 Compliance with Laws.................................. 63
Section 5.09 SEC Reports........................................... 63
Section 5.10 Waiver of Stay, Extension or Usury Laws............... 63
Section 5.11 Limitation on Transactions with Affiliates............ 64
Section 5.12 Limitation on Incurrences of Additional
Indebtedness....................................... 66
Section 5.13 Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries................ 66
Section 5.14 Limitation on Liens................................... 67
Section 5.15 Limitation on Change of Control....................... 68
Section 5.16 Limitation on Asset Sales............................. 71

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<PAGE> 5
Page

Section 5.17 Guarantees of Certain Indebtedness.................... 74
Section 5.18 Limitation on Preferred Stock of
Subsidiaries....................................... 74
Section 5.19 Limitation on Other Senior Subordinated
Indebtedness....................................... 74

ARTICLE SIX

SUCCESSOR CORPORATION

Section 6.01 Limitation on Mergers and Certain Other
Transactions....................................... 75
Section 6.02 Successor Corporation Substituted..................... 76

ARTICLE SEVEN

DEFAULT AND REMEDIES

Section 7.01 Events of Default..................................... 77
Section 7.02 Acceleration.......................................... 79
Section 7.03 Other Remedies........................................ 81
Section 7.04 Waiver of Past Defaults............................... 81
Section 7.05 Control by Majority................................... 81
Section 7.06 Limitation on Suits................................... 82
Section 7.07 Rights of Holders to Receive Payment.................. 82
Section 7.08 Collection Suit by Trustee............................ 83
Section 7.09 Trustee May File Proofs of Claim...................... 83
Section 7.10 Priorities............................................ 84
Section 7.11 Right and Remedies Cumulative......................... 84
Section 7.12 Delay or Omission Not Waiver.......................... 84
Section 7.13 Undertaking for Costs................................. 85

ARTICLE EIGHT

TRUSTEE

Section 8.01 Duties of Trustee..................................... 85
Section 8.02 Rights of Trustee..................................... 87
Section 8.03 Individual Rights of Trustee.......................... 87
Section 8.04 Trustee's Disclaimer.................................. 88
Section 8.05 Notice of Default..................................... 88
Section 8.06 Reports by Trustee to Holders......................... 88
Section 8.07 Compensation and Indemnity............................ 89
Section 8.08 Replacement of Trustee................................ 89
Section 8.09 Successor Trustee by Merger, Etc...................... 91
Section 8.10 Eligibility; Disqualification......................... 91

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<PAGE> 6
Page
Section 8.11 Preferential Collection of Claims Against
Company............................................ 91

ARTICLE NINE

SATISFACTION AND DISCHARGE OF INDENTURE

Section 9.01 Termination of the Company's Obligations.............. 91
Section 9.02 Legal Defeasance and Covenant Defeasance.............. 93
Section 9.03 Application of Trust Money............................ 98
Section 9.04 Repayment to Company or Subsidiary
Guarantors......................................... 98
Section 9.05 Reinstatement......................................... 99

ARTICLE TEN

AMENDMENTS, SUPPLEMENTS AND WAIVERS

Section 10.01 Without Consent of Holders............................ 99
Section 10.02 With Consent of Holders............................... 100
Section 10.03 Compliance with TIA................................... 102
Section 10.04 Revocation and Effect of Consents..................... 102
Section 10.05 Notation on or Exchange of Securities................. 103
Section 10.06 Trustee to Sign Amendments, Etc....................... 103

ARTICLE ELEVEN

GUARANTEE

Section 11.01 Unconditional Guarantee............................... 103
Section 11.02 Subordination of Guarantee............................ 105
Section 11.03 Severability.......................................... 105
Section 11.04 Release of a Subsidiary Guarantor..................... 105
Section 11.05 Limitation of Subsidiary Guarantor's
Liability.......................................... 106
Section 11.06 Subsidiary Guarantors May Consolidate,
etc., on Certain Terms............................. 106
Section 11.07 Contribution.......................................... 107
Section 11.08 Waiver of Subrogation................................. 108
Section 11.09 Execution of Guarantee................................ 109
Section 11.10 Waiver of Stay, Extension or Usury Laws............... 109

-iv-
<PAGE> 7
Page

ARTICLE TWELVE

SUBORDINATION OF GUARANTEE OBLIGATIONS

Section 12.01 Guarantee Obligations Subordinated to
Guarantor Senior Indebtedness...................... 110
Section 12.02 Suspension of Guarantee Obligations When
Guarantor Senior Indebtedness in Default........... 110
Section 12.03 Guarantee Obligations Subordinated to
Prior Payment of All Guarantor Senior
Indebtedness on Dissolution, Liquidation
or Reorganization of Such Subsidiary
Guarantor.......................................... 112
Section 12.04 Holders of Guarantee Obligations To Be
Subrogated to Rights of Holders of
Guarantor Senior Indebtedness...................... 114
Section 12.05 Obligations of the Subsidiary Guarantors
Unconditional...................................... 115
Section 12.06 Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice.................... 116
Section 12.07 Application by Trustee of Assets Deposited
with It............................................ 116
Section 12.08 No Waiver of Subordination Provisions................. 117
Section 12.09 Holders Authorize Trustee to Effectuate
Subordination of Guarantee Obligations............. 117
Section 12.10 Right of Trustee to Hold Guarantor Senior
Indebtedness....................................... 118
Section 12.11 No Suspension of Remedies............................. 118
Section 12.12 No Fiduciary Duty of Trustee to Holders
of Guarantor Senior Indebtedness................... 119

ARTICLE THIRTEEN

MISCELLANEOUS

Section 13.01 TIA Controls.......................................... 119
Section 13.02 Notices............................................... 119
Section 13.03 Communications by Holders with Other
Holders............................................ 120
Section 13.04 Certificate and Opinion as to Conditions
Precedent.......................................... 121
Section 13.05 Statements Required in Certificate or
Opinion............................................ 121
Section 13.06 Rules by Trustee, Paying Agent, Registrar............. 122
Section 13.07 Legal Holidays........................................ 122
Section 13.08 Governing Law......................................... 122
Section 13.09 No Adverse Interpretation of Other
Agreements......................................... 122
Section 13.10 No Recourse Against Others............................ 122

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<PAGE> 8
Page

Section 13.11 Successors............................................ 123
Section 13.12 Duplicate Originals................................... 123
Section 13.13 Severability.......................................... 123
Section 13.14 No Violation.......................................... 123

Signatures............................................................. 124

Exhibit A - Form of Initial Security with Guarantees

Exhibit B - Form of Exchange Security with Guarantees

Exhibit C - Form of Certificate To Be Delivered in Connection
with Transfers to Non-QIB Accredited Investors

Exhibit D - Form of Certificate To Be Delivered in Connection
with Transfers pursuant to Regulation S

Schedule I - Specified Properties

Schedule II - Certain Permitted Indebtedness

Note: This Table of Contents shall not, for any purpose, be deemed
to be part of the Indenture.

-vi-
<PAGE> 9
INDENTURE dated as of May 4, 1995, among DOMINICK'S FINER FOODS, INC.,
a Delaware corporation (the "Company"), the SUBSIDIARY GUARANTORS, and United
States Trust Company of New York, as Trustee.

Each party hereto agrees as follows for the benefit of each other party
and for the equal and ratable benefit of the Holders of the Company's 10 7/8%
Senior Subordinated Notes due 2005 (the "Initial Securities") and Series B
10 7/8% Senior Subordinated Notes due 2005 (the "Exchange Securities," and
together with the Initial Securities, the "Securities"):

ARTICLE ONE

DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.01. Definitions.

"Acquired Indebtedness" means (i) with respect to any person that
becomes a Subsidiary of the Company (or is merged into the Company or any of its
Subsidiaries) after the Issue Date, Indebtedness of such person or any of its
subsidiaries existing at the time such person becomes a Subsidiary of the
Company (or is merged into the Company or any of its Subsidiaries) and which was
not incurred in connection with, or in contemplation of, such person becoming a
Subsidiary of the Company (or being merged into the Company or any of its
Subsidiaries) and (ii) with respect to the Company or any of its Subsidiaries,
any Indebtedness assumed by the Company or any of its Subsidiaries in connection
with the acquisition of any assets from another person (other than the Company
or any of its Subsidiaries), and which was not incurred by such other person in
connection with, or in contemplation of, such acquisition.

"Acquisition" means the acquisition of the Company under and in
accordance with the terms of the Stock Purchase Agreement.

"Adjusted Net Assets" shall have the meaning provided in Section 11.07.

"Affiliate" as applied to any person, means any other person directly
or indirectly controlling, controlled by, or under common control with, that
person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the
<PAGE> 10
-2-

management and policies of that person whether through the ownership of voting
securities or by contract or otherwise. Notwithstanding the foregoing, the term
"Affiliate," with respect to the Company and its Subsidiaries, shall not include
BT Securities Corporation, Chase Securities, Inc. nor any of their respective
Affiliates.

"Affiliate Transaction" shall have the meaning provided in
Section 5.11.

"Agent" means any Registrar, Paying Agent or co- Registrar.

"Asset Sale" means, with respect to any person, any direct or indirect
sale, issuance, conveyance, lease, assignment, transfer or other disposition or
series of sales, transfers or other dispositions (including, without limitation,
by merger or consolidation or by exchange of assets and whether by operation of
law or otherwise) made by such person or any of its subsidiaries to any person
other than such person or one of its wholly owned subsidiaries (or, in the case
of a sale, transfer or other disposition by a Subsidiary, to any person other
than the Company or a directly or indirectly wholly owned Subsidiary) of any
assets of such person or any of its subsidiaries including, without limitation,
assets consisting of any Capital Stock or other securities held by such person
or any of its subsidiaries, and any Capital Stock issued by any subsidiary of
such person, in each case, outside of the ordinary course of business,
excluding, however, any sale, transfer or other disposition, or series of
related sales, transfers or other dispositions (i) resulting in Net Proceeds to
the Company and the Subsidiaries of $250,000 or less or (ii) of Cash Equivalents
or inventory in the ordinary course of business or obsolete equipment in the
ordinary course of business consistent with past practices of the Company or
(iii) the lease or sublease of any real or personal property in the ordinary
course of business or (iv) the proceeds of such Asset Sale which are not applied
in accordance with Section 5.16 and which, together with all other such Asset
Sale proceeds do not exceed $10 million.

"Bankruptcy Law" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute or any
other United States federal, state or local law or the law of any other
jurisdiction relating to bankruptcy, insolvency, winding up, liquidation,
reorganization or relief of debtors, whether in effect on the date hereof or
hereafter.
<PAGE> 11
-3-

"BDI" means Blackhawk Development Inc., a Delaware corporation.

"Board of Directors" means, with respect to any person, the Board of
Directors of such person or any duly authorized committee of that Board.

"Board Resolution" means, with respect to any person, a duly adopted
resolution of the Board of Directors of such person.

"BPI" means Blackhawk Properties, Inc., a Delaware corporation.

"Business Day" means a day that is not a Legal Holiday.

"Capitalized Lease Obligation" means obligations under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligations shall be
the capitalized amount of such obligations determined in accordance with GAAP.

"Capital Stock" means with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock, including, without limitation, each class of Common Stock and Preferred
Stock of such Person.

"Cash Equivalents" means (i) obligations issued or unconditionally
guaranteed by the United States of America or any agency thereof, or obligations
issued by any agency or instrumentality thereof and backed by the full faith and
credit of the United States of America, (ii) commercial paper rated the highest
grade by Moody's Investors Service, Inc. and Standard & Poor's Ratings Group and
maturing not more than one year from the date of creation thereof, (iii) time
deposits with, and certificates of deposit and banker's acceptances issued by,
any bank having capital surplus and undivided profits aggregating at least $500
million and maturing not more than one year from the date of creation thereof,
(iv) repurchase agreements that are secured by a perfected security interest in
an obligation described in clause (i) and are with any bank described in clause
(iii), (v) shares of any money market mutual fund that (a) has at least 95% of
its assets invested continuously in the types of investments referred to in
clauses (i) and (ii) above, (b) has net assets of not less than $500 million,
and (c) has the highest rating obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc. and (vi) readily marketable
direct obligations issued by any state of the United States of America or any
political subdivision thereof having one of the two highest
<PAGE> 12
-4-

rating categories obtainable from either Moody's Investors Service, Inc. or
Standard & Poor's Ratings Group.

"Change of Control" means the acquisition after the Issue Date, in one
or more transactions, of beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) by (i) any person or entity (other than any Permitted
Holder) or (ii) any group of persons or entities (excluding any Permitted
Holders) who constitute a group (within the meaning of Section 13(d)(3) of the
Exchange Act), in either case, of any securities of Holdings or the Company such
that, as a result of such acquisition, such person, entity or group beneficially
owns (within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, 40% or more of the then outstanding voting securities entitled to
vote on a regular basis for a majority of the Board of Directors of the Company
(but only to the extent that such beneficial ownership is not shared with any
Permitted Holder who has the power to direct the vote thereof); provided,
however, that no such Change of Control shall be deemed to have occurred if (A)
the Permitted Holders beneficially own, in the aggregate, at such time, a
greater percentage of such voting securities than such other person, entity or
group or (B) at the time of such acquisition, the Permitted Holders (or any of
them) possess the ability (by contract or otherwise) to elect, or cause the
election, of a majority of the members of the Company's Board of Directors.

"Change of Control Date" shall have the meaning provided in Section
5.15.

"Change of Control Offer" shall have the meaning provided in Section
5.15.

"Change of Control Payment Date" shall have the meaning provided in
Section 5.15.

"Commission" means the Securities and Exchange Commission.

"Common Stock" means, with respect to any person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of, such person's common stock, whether
outstanding at the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.

"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.
<PAGE> 13
-5-

"Consolidated Net Income," means, with respect to any person, for any
period, the aggregate of the net income (or loss) of such person and its
subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (a) the net income of any other person in which such
person or any of its subsidiaries has an interest (which interest does not cause
the net income of such other person to be consolidated with the net income of
such person and its subsidiaries in accordance with GAAP) shall be included only
to the extent of the amount of dividends or distributions actually paid to such
person or such subsidiary by such other person during such period; (b) the net
income of any subsidiary of such person that is subject to any Payment
Restriction shall be excluded to the extent such Payment Restriction actually
prevented the payment of an amount that otherwise could have been paid to such
person or to a subsidiary of such person not subject to any Payment Restriction;
and (c) there shall be excluded (i) the net income (or loss) of any other person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition, (ii) all gains and losses realized on any Asset Sale, (iii)
all gains realized upon or in connection with or as a consequence of any gains
on pension reversions received by such person or any of its subsidiaries, (iv)
all gains and losses realized on the purchase or other acquisition by such
person or any of its subsidiaries of any securities of such person or any of its
subsidiaries, (v) all other net extraordinary gains, and (vi) (A) all non-cash
charges (provided, however, that any cash payments actually made with respect to
the liabilities for which such charges were created shall be deducted from
Consolidated Net Income in the period when made) and (B) all deferred financing
costs written off in connection with the early extinguishment of any
Indebtedness, in each case, incurred by the Company or any of its Subsidiaries
in connection with the Acquisition.

"Consolidated Net Worth" means, with respect to any person, (i) the
total stockholders' equity (exclusive of any Disqualified Capital Stock) of such
person and its subsidiaries determined on a consolidated basis in accordance
with GAAP plus (ii) to the extent amounts attributable thereto are not otherwise
included in clause (i), the aggregate amount of the liquidation preference
(including accrued but unpaid dividends thereon to the extent such dividends
have reduced any amounts included in clause (i) without an offsetting increase)
then applicable to the Seller Preferred Stock (which amount, on a per share
basis, shall in no event be greater than the amount per share in effect on the
Issue Date plus any accrued but unpaid dividends thereon to the extent such
dividends have reduced any amounts included in clause (i) without an offsetting
increase).
<PAGE> 14
-6-

"Credit Agent" means, at any time, the then-acting Administrative Agent
as defined in and under the Senior Credit Facilities, which initially shall be
Bankers Trust Company. The Company shall promptly notify the Trustee of any
change in the Credit Agent.

"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.

"DFF" means DFF Supermarkets, Inc., a Delaware corporation.

"Default" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.

"Designated Senior Indebtedness" means (i) any Indebtedness under the
Senior Credit Facilities and (ii) if no Indebtedness under the Senior Credit
Facilities is outstanding, any other Senior Indebtedness which, at the date of
determination, has an aggregate principal amount of, or under which, at the date
of determination, the holders thereof are committed to lend up to, at least $25
million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of this Indenture. For purposes of this definition,
the term "Senior Credit Facilities" shall not include any agreement governing
Indebtedness incurred to refund, replace or refinance borrowings or commitments
under the Senior Credit Facilities other than any such agreements incurred to
refund, replace or refinance the entirety of the borrowings and commitments then
outstanding or permitted to be outstanding thereunder.

"Disqualified Capital Stock" means, with respect to any person, any
Capital Stock of such person or its subsidiaries that, by its terms, by the
terms of any agreement related thereto or by the terms of any security into
which it is convertible, puttable or exchangeable, is, or upon the happening of
an event or the passage of time would be, required to be redeemed or repurchased
by such person or its subsidiaries, including at the option of the holder
thereof, in whole or in part, or has, or upon the happening of an event or
passage of time would have, a redemption or similar payment due, on or prior to
the Maturity Date or any other Capital Stock of such person or its subsidiaries
designated as Disqualified Capital Stock by such person at the time of issuance;
provided, however, that if such Capital Stock is either (i) redeemable or
repurchasable solely at the option of such person or (ii) issued to
<PAGE> 15
-7-

employees of the Company or its Subsidiaries or to any plan for the benefit of
such employees, such Capital Stock shall not constitute Disqualified Capital
Stock unless so designated.

"EBITDA" means, with respect to any person, for any period, the
Consolidated Net Income of such person for such period, plus, in each case to
the extent deducted in computing Consolidated Net Income of such person for such
period (without duplication) (i) provisions for income taxes or similar charges
recognized by such person and its consolidated subsidiaries accrued during such
period, (ii) depreciation and amortization expense of such person and its
consolidated subsidiaries accrued during such period (but only to the extent not
included in Fixed Charges), (iii) Fixed Charges of such person and its
consolidated subsidiaries for such period, (iv) LIFO charges (credit) of such
person and its consolidated subsidiaries for such period, (v) the amount of any
restructuring reserve or charge recorded during such period in accordance with
GAAP, including any such reserve or charge related to the Acquisition, and (vi)
any other non-cash charges reducing Consolidated Net Income for such period
(excluding any such charge which requires an accrual of or a cash reserve for
anticipated cash charges for any future period), less, without duplication, (x)
non-cash items increasing Consolidated Net Income of such person for such period
(excluding any such items which represent the reversal of any accrual of, or
cash reserve for, anticipated cash charges in any prior period) in each case
determined in accordance with GAAP and (y) the amount of all cash payments made
by such person or its subsidiaries during such period to the extent that such
cash payment has been provided for in a restructuring reserve or charge referred
to in clause (v) above (and was not otherwise deducted in the computation of
Consolidated Net Income of such person for such period).

"Event of Default" shall have the meaning provided in Section 7.01.

"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the Commission thereunder.

"Exchange Securities" has the meaning provided in the preamble to this
Indenture.

"Exchange Offer" means the registration by the Company under the
Securities Act pursuant to a registration statement of the offer by the Company
to each Holder of the Initial Securities to exchange all the Initial Securities
held by such Holder for the Exchange Securities in an aggregate principal amount
equal to the
<PAGE> 16
-8-

aggregate principal amount of the Initial Securities held by such Holder, all in
accordance with the terms and conditions of the Registration Rights Agreement by
and among the Company, the Subsidiary Guarantors and the Initial Purchasers,
dated May 4, 1995.

"Fiscal Year" means the fiscal year of the Company and its Subsidiaries
ending on the Saturday closest to October 31 of each calendar year. For purposes
of this Indenture, any particular Fiscal Year shall be designated by reference
to the calendar year in which such Fiscal Year ends.

"Fixed Charge Coverage Ratio" means, with respect to any person, the
ratio of (1) EBITDA of such person for the period (the "Pro Forma Period")
consisting of the most recent four full fiscal quarters for which financial
information in respect thereof is available immediately prior to the date of the
transaction giving rise to the need to calculate the Fixed Charge Coverage Ratio
(the "Transaction Date") to (2) the aggregate Fixed Charges of such person for
the fiscal quarter in which the Transaction Date occurs and the three fiscal
quarters immediately subsequent to such fiscal quarter (the "Forward Period")
reasonably anticipated by the Board of Directors of such person to become due
from time to time during such period. In addition to, but without duplication
of, the foregoing, for purposes of this definition, "EBITDA" shall be calculated
after giving effect (without duplication), on a pro forma basis for the Pro
Forma Period (but no longer), to (a) any Investment, during the period
commencing on the first day of the Pro Forma Period to and including the
Transaction Date (the "Reference Period"), in any other person that, as a result
of such Investment, becomes a subsidiary of such person, (b) the acquisition,
during the Reference Period (by merger, consolidation or purchase of stock or
assets) of any business or assets, and (c) any sales or other dispositions of
assets (other than sales of inventory in the ordinary course of business)
occurring during the Reference Period, in each case as if such incurrence,
Investment, repayment, acquisition or asset sale had occurred on the first day
of the Reference Period. In addition, for purposes of this definition, "Fixed
Charges" shall be calculated after giving effect (without duplication), on a pro
forma basis for the Forward Period, to any Indebtedness incurred or repaid on or
after the first day of the Reference Period and prior to the Transaction Date,
including any Indebtedness of an entity which existed at the time such entity
became a subsidiary of such person which shall be deemed Incurred as of the date
such entity became a subsidiary of such person. If such person or any of its
subsidiaries directly or indirectly guarantees any Indebtedness of a third
person, the Fixed Charge Coverage Ratio shall give effect to the incurrence of
such
<PAGE> 17
-9-

Indebtedness as if such person or subsidiary had directly incurred such
guaranteed Indebtedness.

"Fixed Charges" means, with respect to any person, for any period, the
aggregate amount of (i) interest, whether expensed or capitalized, paid, accrued
or scheduled to be paid or accrued during such period (except to the extent
accrued in a prior period) in respect of all Indebtedness of such person and its
consolidated subsidiaries (including (a) original issue discount on any
Indebtedness, but excluding amortization of debt issuance costs, and (b) the
interest portion of all deferred payment obligations, calculated in accordance
with the effective interest method, in each case to the extent attributable to
such period, but excluding amortization of debt issuance costs), and (ii)
dividend requirements on Preferred Stock of such person and its consolidated
subsidiaries paid or scheduled to be paid in cash during such period and
excluding items eliminated in consolidation. For purposes of this definition,
(a) interest on a Capitalized Lease Obligation shall be deemed to accrue at an
interest rate reasonably determined by the Board of Directors of such person (as
evidenced by a Board Resolution) to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP, (b) interest on
Indebtedness that is determined on a fluctuating basis shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest of such
Indebtedness in effect on the date Fixed Charges are being calculated, (c)
interest on Indebtedness that may optionally be determined at an interest rate
based upon a factor of a prime or similar rate, a eurocurrency interbank offered
rate, or other rate, shall be deemed to have been based upon the rate actually
chosen, or, if none, then based upon such optional rate chosen as the Company
may designate, and (d) Fixed Charges shall be increased or reduced by the net
cost (including amortization of discount) or benefit associated with Interest
Swap Obligations attributable to such period. For purposes of clause (ii) above,
dividend requirements shall be increased to an amount representing the pretax
earnings that would be required to cover such dividend requirements;
accordingly, the increased amount shall be equal to a fraction, the numerator of
which is the amount of such dividend requirements and the denominator of which
is one (1) minus the applicable actual combined federal, state, local and
foreign income tax rate of such person and its subsidiaries (expressed as a
decimal), on a consolidated basis, for the fiscal year immediately preceding the
date of the transaction giving rise to the need to calculate Fixed Charges.

"Foreign Exchange Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or

<PAGE> 18
-10-

arrangement designed to protect against fluctuations in currency values.

"Forward Period" shall have the meaning provided in the definition of
"Operating Coverage Ratio" contained in this Section 1.01.

"GAAP" means generally accepted accounting principles as in effect in
the United States of America as of the date of this Indenture.

"Guarantee" means the guarantee of each Subsidiary Guarantor set forth
in Article Eleven and any additional guarantee of the Securities executed by any
Subsidiary of the Company.

"Guarantee Obligations" shall have the meaning provided in Section
12.01.

"Guarantor Payment Blockage Period" shall have the meaning provided in
Section 12.02.

"Guarantor Senior Indebtedness" means, with respect to any Subsidiary
Guarantor, the principal of, premium, if any, and interest on and all other
Obligations with respect to any Indebtedness of such Subsidiary Guarantor,
whether outstanding on the Issue Date or thereafter created, incurred or
assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Guarantee of such Subsidiary Guarantor. Without limiting the
generality of the foregoing, "Guarantor Senior Indebtedness" shall include (x)
the principal of, premium, if any, and interest on all obligations of every
nature of such Subsidiary Guarantor from time to time owed to the lenders under
the Senior Credit Facilities, including, without limitation, the Letter of
Credit Obligations and principal of and interest on, and all fees, indemnities
and expenses payable under the Senior Credit Facilities and (y) interest
accruing thereon subsequent to the occurrence of any Event of Default specified
in clauses (vi) and (vii) of Section 7.01 relating to the Subsidiary Guarantors,
whether or not the claim for such interest is allowed under any applicable
Bankruptcy Law. Notwithstanding the foregoing, "Guarantor Senior Indebtedness"
shall not include (a) Indebtedness evidenced by the Guarantee of such Subsidiary
Guarantor, (b) Indebtedness that is expressly subordinate or junior in right of
payment to any Indebtedness of such Subsidiary Guarantor, (c) Indebtedness
which, when incurred and without respect to any election under Section 1111(b)
of Title 11, United States Code, is without recourse to
<PAGE> 19
-11-

such Subsidiary Guarantor (other than Capitalized Lease Obligations), (d)
Indebtedness which is represented by Disqualified Capital Stock, (e) obligations
for goods, materials or services purchased in the ordinary course of business or
obligations consisting of trade payables, (f) Indebtedness of or amounts owed by
such Subsidiary Guarantor for compensation to employees or for services rendered
to such Subsidiary Guarantor, (g) any liability for federal, state, local or
other taxes owed or owing by such Subsidiary Guarantor, (h) Indebtedness of such
Subsidiary Guarantor representing a guarantee of Subordinated Indebtedness or
Pari Passu Indebtedness of the Company or any other Subsidiary Guarantor, (i)
Indebtedness of such Subsidiary Guarantor to a Subsidiary of the Company and (j)
that portion of any Indebtedness which is incurred by such Subsidiary Guarantor
in violation of this Indenture.

"Holder" or "Securityholder" means the person in whose name a Security
is registered on the Registrar's books.

"Holdings" means Dominick's Supermarkets, Inc., a Delaware corporation.

"Indebtedness" means with respect to any person, without duplication,
(i) all liabilities, contingent or otherwise, of such person (a) for borrowed
money (whether or not the recourse of the lender is to the whole of the assets
of such person or only to a portion thereof), (b) evidenced by bonds, notes,
debentures, drafts accepted or similar instruments or letters of credit or
representing the balance deferred and unpaid of the purchase price of any
property (other than any such balance that represents an account payable or any
other monetary obligation to a trade creditor (whether or not an Affiliate)
created, incurred, assumed or guaranteed by such person in the ordinary course
of business of such person in connection with obtaining goods, materials or
services and due within twelve months (or such longer period for payment as is
customarily exended by such trade creditor) of the incurrence thereof, which
account is not overdue by more than 90 days, according to the original terms of
sale, unless such account payable is being contested in good faith), or (c) for
the payment of money relating to a Capitalized Lease Obligation; (ii) the
maximum fixed repurchase price of all Disqualified Capital Stock of such person;
(iii) reimbursement obligations of such person with respect to letters of
credit; (iv) obligations of such person with respect to Interest Swap
Obligations and Foreign Exchange Agreements; (v) all liabilities of others of
the kind described in the preceding clause (i), (ii), (iii) or (iv) that such
person has guaranteed or that is otherwise its legal liability; and (vi) all
obligations of others secured by a Lien to which any of the
<PAGE> 20
-12-

properties or assets (including, without limitation, leasehold interests and any
other tangible or intangible property rights) of such person are subject,
whether or not the obligations secured thereby shall have been assumed by such
person or shall otherwise be such person's legal liability (provided that if the
obligations so secured have not been assumed by such person or are not otherwise
such person's legal liability, such obligations shall be deemed to be in an
amount equal to the fair market value of such properties or assets, as
determined in good faith by the Board of Directors of such person, which
determination shall be evidenced by a Board Resolution). For purposes of the
preceding sentence, the "maximum fixed repurchase price" of any Disqualified
Capital Stock that does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock (or any equity security for which it may be exchanged or
converted), such fair market value shall be determined in good faith by the
Board of Directors of such person, which determination shall be evidenced by a
Board Resolution. For purposes of this Indenture, Indebtedness incurred by any
person that is a general partnership (other than non-recourse Indebtedness)
shall be deemed to have been incurred by the general partners of such
partnership pro rata in accordance with their respective interests in the
liabilities of such partnership unless any such general partner shall, in the
reasonable determination of the Board of Directors of the Company, be unable to
satisfy its pro rata share of the liabilities of the partnership, in which case
the pro rata share of any Indebtedness attributable to such partner shall be
deemed to be incurred at such time by the remaining general partners on a pro
rata basis in accordance with their interests.

"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.

"Independent Financial Advisor" means an accounting, appraisal,
investment banking or consulting firm of nationally recognized standing that is,
in the reasonable and good faith judgment of the Board of Directors of the
Company, qualified to perform the task for which such firm has been engaged and
disinterested and independent with respect to the Company and its Affiliates.

"Initial Purchasers" means BT Securities Corporation and Chase
Securities, Inc.
<PAGE> 21
-13-

"Initial Securities" has the meaning provided in the preamble to this
Indenture.

"Interest Payment Date" means the stated maturity of an installment of
interest on the Securities.

"Interest Swap Obligation" means any obligation of any person pursuant
to any arrangement with any other person whereby, directly or indirectly, such
person is entitled to receive from time to time periodic payments calculated by
applying either a fixed or floating rate of interest on a stated notional amount
in exchange for periodic payments made by such person calculated by applying a
fixed or floating rate of interest on the same notional amount; provided that
the term "Interest Swap Obligation" shall also include interest rate exchange,
collar, cap, swap option or similar agreements providing interest rate
protection.

"Investment" by any person in any other person means any investment by
such person in such other person, whether by share purchase, capital
contribution, loan, advance (other than reasonable loans and advances to
employees for moving and travel expenses, as salary advances or to permit the
purchase of Qualified Capital Stock of the Company or Holdings and other similar
customary expenses incurred, in each case in the ordinary course of business
consistent with past practice) or similar credit extension constituting
Indebtedness of such other person, and any guarantee of Indebtedness of any
other person.

"Issue Date" means the date of original issuance of the Securities
under this Indenture.

"Legal Holiday" shall have the meaning provided in Section 13.07.

"Letter of Credit Obligations" means Indebtedness of the Company or any
of its Subsidiaries with respect to letters of credit issued pursuant to the
Senior Credit Facilities, and for purposes of the definition of the term
"Permitted Indebtedness," the aggregate principal amount of Indebtedness
outstanding at any time with respect thereto shall be deemed to consist of (a)
the aggregate maximum amount then available to be drawn under all such letters
of credit (the determination of such maximum amount to assume compliance with
all conditions for drawing), and (b) the aggregate amount that has been paid by,
and not reimbursed to, the issuers under such letters of credit.

"Lien" means any mortgage, pledge, lien, encumbrance,
charge or adverse claim affecting title or resulting in an
<PAGE> 22
-14-

encumbrance against real or personal property, or a security interest of any
kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell which is
intended to constitute or create a security interest, mortgage, pledge or lien,
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction); provided that in
no event shall an operating lease be deemed to constitute a Lien under this
Indenture.

"Maturity Date" means May 1, 2005.

"Net Cash Proceeds" means the Net Proceeds of any Asset Sale received
in the form of cash or Cash Equivalents.

"Net Proceeds" means (a) in the case of any Asset Sale or any issuance
and sale by any person of Qualified Capital Stock, the aggregate net proceeds
received by such person after payment of expenses, taxes, commissions and the
like incurred in connection therewith (and, in the case of any Asset Sale, net
of the amount of cash applied to repay Indebtedness secured by the asset
involved in such Asset Sale), whether such proceeds are in cash or in property
(valued at the fair market value thereof at the time of receipt, as determined
with respect to any Asset Sale resulting in Net Proceeds in excess of $5.0
million in good faith by the Board of Directors of such person, which
determination shall be evidenced by a Board Resolution) and (b) in the case of
any conversion or exchange of any outstanding Indebtedness or Disqualified
Capital Stock of such person for or into shares of Qualified Capital Stock of
the Company, the sum of (i) the fair market value of the proceeds received by
the Company in connection with the issuance of such Indebtedness or Disqualified
Capital Stock on the date of such issuance and (ii) any additional amount paid
by the holder to the Company upon such conversion or exchange.

"Non-payment Default" means any event (other than a Payment Default)
the occurrence of which entitles one or more persons to act to accelerate the
maturity of any Designated Senior Indebtedness.

"Obligations" means all obligations of every nature whether for
principal, reimbursements, interest, fees, expenses, indemnities or otherwise,
and whether primary, secondary, direct, indirect, contingent, fixed or otherwise
(including obligations of performance) under the documentation governing any
Indebtedness.
<PAGE> 23
-15-

"Offering Memorandum" means the Offering Memorandum dated April 27,
1995, pursuant to which the Initial Securities were offered, and any supplement
thereto.

"Officer" means, with respect to any person, the Chairman of the Board,
the President, any Vice President, the Chief Financial Officer, the Controller,
or the Secretary of such person.

"Officers' Certificate" means, with respect to any person, a
certificate signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of such person and otherwise complying with
the requirements of Sections 13.04 and 13.05.

"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of Sections
13.04 and 13.05. Unless otherwise required by the Trustee, the legal counsel may
be an employee of or counsel to the Company or the Trustee.

"Parent Intercompany Note" means that certain promissory note dated as
of March 22, 1995, due from DFF to the Company in the original principal amount
of $344,865,000 evidencing the loan made by the Company to DFF in such amount on
the Acquisition closing date as in effect on such date.

"Pari Passu Indebtedness" means, with respect to the Company or any
Subsidiary Guarantor, Indebtedness of such person which ranks pari passu in
right of payment to the Securities or the Guarantee of such Subsidiary
Guarantor, as the case may be.

"Paying Agent" shall have the meaning provided in Section 2.03, except
that, for the purposes of Articles Three and Nine and Sections 5.15 and 5.16,
the Paying Agent shall not be the Company or an Affiliate of the Company.

"Payment Blockage Notice" shall have the meaning provided in Section
4.02.

"Payment Blockage Period" shall have the meaning provided in Section
4.02.

"Payment Default" means any default in the payment of
principal, premium, if any, or interest on any Designated Senior
Indebtedness or Significant Senior Indebtedness beyond any
applicable grace period with respect thereto.
<PAGE> 24
-16-

"Payment Restriction" means, with respect to a subsidiary of any
person, any encumbrance, restriction or limitation, whether by operation of the
terms of its charter or by reason of any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation, on the ability of (i)
such subsidiary to (a) pay dividends or make other distributions on its Capital
Stock or make payments on any obligation, liability or Indebtedness owed to such
person or any other subsidiary of such person, (b) make loans or advances to
such person or any other subsidiary of such person, or (c) transfer any of its
properties or assets to such person or any other subsidiary of such person, or
(ii) such person or any other subsidiary of such person to receive or retain any
such (a) dividends, distributions or payments, (b) loans or advances, or (c)
transfer of properties or assets.

"Permitted Holder" means (i) Yucaipa Management L.L.C., a Delaware
limited liability company, The Yucaipa Companies, a California general
partnership, or any entity controlled thereby or any of the partners or members
thereof, (ii) Apollo Advisors, L.P., Lion Advisors, L.P. or any entity
controlled thereby or any of the partners thereof, (iii) Bankers Trust New York
Corporation and The Chase Manhattan Bank, N.A. or any Affiliate thereof, (iv) an
employee benefit plan of the Company or any of its Subsidiaries, or any
participant therein, (v) a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any of its Subsidiaries or (vi) any
Permitted Transferee of any of the foregoing persons.

"Permitted Indebtedness" means (a) Indebtedness of the Company and its
Subsidiaries (and the Company and each Subsidiary (to the extent it is not an
obligor) may guarantee such Indebtedness) pursuant to (i) the Term Loans in an
aggregate principal amount at any time outstanding not to exceed $330 million,
less the aggregate amount of all principal repayments thereunder pursuant to and
in accordance with the requirements of Section 5.16 subsequent to the Issue
Date, (ii) the revolving credit facility under the Senior Credit Facilities in
an aggregate principal amount at any time outstanding not to exceed $120
million, less all permanent reductions thereunder pursuant to and in accordance
with the requirements of Section 5.16, and (iii) any Indebtedness incurred under
the Senior Credit Facilities pursuant to and in compliance with (A) clause (m)
of this definition or (B) Section 5.12, (b) any Indebtedness of the Company or
any of its Subsidiaries which, in the case of the Company, is owing to any
wholly owned Subsidiary of the Company and which, in the case of any such
Subsidiary, is owing to the Company or any wholly owned Subsidiary of the
Company, (c) Indebtedness incurred by the Company or any Subsidiary in
connection with the purchase or
<PAGE> 25
-17-

improvement of property (real or personal) or equipment or other capital
expenditures in the ordinary course of business (including for the purchase of
assets or stock of any retail grocery store or business) or consisting of
Capitalized Lease Obligations, provided that (i) at the time of the incurrence
thereof, such Indebtedness, together with any other Indebtedness incurred during
the most recently completed four fiscal quarter period in reliance upon this
clause (c) does not exceed, in the aggregate, 3% of net sales of the Company and
its Subsidiaries during the most recently completed four fiscal quarter period
on a consolidated basis (calculated on a pro forma basis if the date of
incurrence is prior to the end of the fourth fiscal quarter following the
Acquisition) and (ii) such Indebtedness, together with all then outstanding
Indebtedness incurred in reliance upon this clause (c) does not exceed, in the
aggregate, 3% of the aggregate net sales of the Company and its Subsidiaries
during the most recently completed twelve fiscal quarter period on a
consolidated basis (calculated on a pro forma basis if the date of incurrence is
prior to the end of the twelfth fiscal quarter following the Acquisition); (d)
Indebtedness of the Company incurred under Foreign Exchange Agreements and
Interest Swap Obligations entered into with respect to Indebtedness in a
notional amount not exceeding the aggregate principal amount of Indebtedness and
otherwise permitted to be outstanding pursuant to Section 5.12; (e) guarantees
incurred in the ordinary course of business, by the Company or a Subsidiary, of
Indebtedness of any other person in the aggregate not to exceed $15 million at
any time outstanding; (f) guarantees by the Company or a Subsidiary Guarantor of
Indebtedness incurred by a wholly owned Subsidiary Guarantor so long as the
incurrence of such Indebtedness incurred by such wholly owned Subsidiary
Guarantor is permitted under the terms of this Indenture; (g) Refinancing
Indebtedness; (h) Indebtedness for letters of credit relating to workers'
compensation claims and self-insurance or similar requirements in the ordinary
course of business; (i) other Indebtedness outstanding on the Issue Date and
specified on Schedule II attached hereto; (j) Indebtedness arising from
guarantees of Indebtedness of the Company or any Subsidiary or other agreements
of the Company or a Subsidiary providing for indemnification, adjustment of
purchase price or similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or Subsidiary, other
than guarantees of Indebtedness incurred by any person acquiring all or any
portion of such business, assets or Subsidiary for the purpose of financing such
acquisition; provided that the maximum assumable liability in respect of all
such Indebtedness shall at no time exceed the gross proceeds actually received
by the Company and its Subsidiaries in connection with such disposition; (k)
obligations in respect of performance bonds and completion guarantees provided
by the Company or any Subsidiary
<PAGE> 26
-18-

in the ordinary course of business; (l) Indebtedness to BDI and BPI in an
aggregate principal amount not to exceed $350,000 and (m) additional
Indebtedness of the Company and the Subsidiary Guarantors in an amount not to
exceed $75 million in the aggregate at any time outstanding.

"Permitted Investment" by any person means (i) any Related Business
Investment, (ii) Investments in securities not constituting cash or Cash
Equivalents and received in connection with an Asset Sale made pursuant to
Section 5.16 or any other disposition of assets not constituting an Asset Sale
by reason of the $250,000 threshold contained in the definition thereof, (iii)
cash and Cash Equivalents, (iv) Investments existing on the Issue Date, (v)
Investments specifically permitted by and made in accordance with Section 5.11,
(vi) Investments by Subsidiary Guarantors in other Subsidiary Guarantors or the
Company and Investments by the Company in Subsidiary Guarantors in the form of
Indebtedness owed to the Company by a Subsidiary Guarantor and Investments by
Subsidiaries which are not Subsidiary Guarantors in other Subsidiaries which are
not Subsidiary Guarantors and (vii) additional Investments in an aggregate
amount not exceeding $15 million.

"Permitted Liens" means (i) Liens for taxes, assessments and
governmental charges or claims not yet due or which are being contested in good
faith by appropriate proceedings promptly instituted and diligently conducted
and if a reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor; (ii) statutory Liens of
landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other like Liens arising in the ordinary course of business,
deposits made to obtain the release of such Liens, and with respect to amounts
not yet delinquent for a period of more than 60 days or being contested in good
faith by an appropriate process of law, and for which a reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made; (iii) Liens incurred or pledges or deposits made in the ordinary course of
business to secure obligations under workers' compensation, unemployment
insurance or other types of social security or similar legislation; (iv) Liens
incurred or deposits made to secure the performance of tenders, bids, leases,
statutory obligations, surety and appeal bonds, government contracts,
performance and return of money bonds and other obligations of a like nature
incurred in the ordinary course of business (exclusive of obligations for the
payment of borrowed money); (v) easements, rights-of-way, zoning or other
restrictions, minor defects or irregularities in title and other similar charges
or encumbrances not interfering in any material respect with the
<PAGE> 27
-19-

existing or proposed use by the Company or any of its Subsidiaries incurred in
the ordinary course of business; (vi) Liens upon specific items of inventory or
other goods and proceeds of any person securing such person's obligations in
respect of bankers' acceptances issued or created for the account of such person
to facilitate the purchase, shipment or storage of such inventory or other goods
in the ordinary course of business; (vii) Liens securing reimbursement
obligations with respect to letters of credit which encumber documents and other
property relating to such letters of credit and the products and proceeds
thereof; (viii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of nondelinquent customs duties in connection
with the importation of goods; (ix) judgment and attachment Liens not giving
rise to a Default or Event of Default; (x) leases or subleases granted to others
not interfering in any material respect with the business of the Company or any
Subsidiary; (xi) Liens encumbering customary initial deposits and margin
deposits, and other Liens incurred in the ordinary course of business that are
within the general parameters customary in the industry, in each case securing
Indebtedness under Interest Swap Obligations and Foreign Exchange Agreements and
forward contracts, option futures contracts, futures options or similar
agreements or arrangements designed to protect the Company or any Subsidiary
from fluctuations in the price of commodities; (xii) Liens encumbering deposits
made in the ordinary course of business to secure nondelinquent obligations
arising from statutory, regulatory, contractual or warranty requirements of the
Company or its Subsidiaries for which a reserve or other appropriate provision,
if any, as shall be required by GAAP shall have been made; (xiii) Liens arising
out of consignment or similar arrangements for the sale of goods entered into by
the Company or any Subsidiary in the ordinary course of business in accordance
with past practices; (xiv) any interest or title of a lessor in the property
subject to any lease, whether characterized as capitalized or operating other
than any such interest or title resulting from or arising out of a default by
the Company or any Subsidiary of its obligations under such lease; (xv) Liens
arising from filing UCC financing statements for precautionary purposes in
connection with true leases of personal property that are otherwise permitted
under the applicable indenture and under which the Company or any Subsidiary is
lessee; (xvi) Liens on assets of the Company securing Indebtedness which would
constitute Senior Indebtedness but for the provisions of clause (c) in the third
sentence of the definition of Senior Indebtedness and Liens on assets of a
Subsidiary Guarantor securing Indebtedness which would constitute Guarantor
Senior Indebtedness but for the provisions of clause (c) in the third sentence
of the definition of Guarantor Senior Indebtedness; and (xvii) additional Liens
securing Indebtedness at any one time outstanding not
<PAGE> 28
-20-

exceeding the sum of (i) $15 million and (ii) 10% of the aggregate Consolidated
Net Income of the Company earned subsequent to the Issue Date and on or prior to
such time.

"Permitted Payments" means (i) any payment by the Company or any
Subsidiary to Yucaipa or the principals or any Affiliates thereof for
consulting, management, investment banking or similar advisory services pursuant
to that certain Consulting Agreement, dated as of March 22, 1995, among the
Company, Holdings and Yucaipa (as such Consulting Agreement may be amended or
replaced, so long as any amounts paid under any amended or replacement agreement
do not exceed the amounts payable under such Consulting Agreement as in effect
on the Issue Date); (ii) any payment by the Company or any Subsidiary pursuant
to the Tax Sharing Agreement, dated as of March 22, 1995, by and among the
Company, Holdings, DFF, BDI, BPI and certain Subsidiaries, as such Tax Sharing
Agreement may be amended from time to time, so long as the payment thereunder by
the Company and its Subsidiaries shall not exceed the amount of taxes the
Company would be required to pay if it were the filing person for all applicable
taxes, (iii) any payment by the Company or any Subsidiary (a) in connection with
repurchases of outstanding shares of the Company's or Holdings' Common Stock
following the death, disability or termination of employment of management
stockholders, and (b) of amounts required to be paid by Holdings, the Company or
any of its Subsidiaries to participants in employee benefit plans upon
termination of employment by such participants, as provided in the documents
related thereto, in an aggregate amount (for both clauses (a) and (b)) not to
exceed the sum of (x) $5 million in any Fiscal Year (provided that any unused
amounts may be carried over to any subsequent Fiscal Year subject to a maximum
amount of $10 million in any Fiscal Year) and (y) the aggregate amount of cash
proceeds received by Holdings in such Fiscal Year from its sale of shares of
Holdings Common Stock to an employee stock option or other stock plan of any of
the Company, Holdings or DFF or to participants in any such plan or from any
employee of any of the Company, Holdings or DFF during such Fiscal Year, (iv)
dividends or other payments to Holdings and DFF sufficient to enable Holdings
and DFF to perform accounting, legal, corporate reporting and administrative
functions in the ordinary course of business, pay their obligations in respect
of certain State of Illinois qualification fees and charges, or to pay required
fees and expenses in connection with the Acquisition and the registration under
applicable laws and regulations of their debt or equity securities; (v)
dividends by the Company to Holdings and DFF of the Net Cash Proceeds of an
Asset Sale to the extent that (w) neither the Company nor any of the
Subsidiaries is required, or may be required, pursuant to the documents
governing any outstanding Indebtedness of the Company or any of the Subsidiaries
to utilize
<PAGE> 29
-21-

such Net Cash Proceeds to repay (or offer to repay) such Indebtedness (or has
complied with all such requirements), (x) such Net Cash Proceeds have not been
utilized to repay outstanding Indebtedness of the Company or any of the
Subsidiaries and (y) Holdings or DFF is required pursuant to the documents
governing any outstanding Indebtedness of Holdings or DFF to utilize such Net
Cash Proceeds to repay (or offer to repay) any such Indebtedness; (vi) dividend
payments to DFF for the sole purpose of allowing DFF to make regularly scheduled
payments of interest in respect of the Parent Intercompany Note; provided that
any such amount distributed is immediately delivered to the Company in payment
of interest owing on the Parent Intercompany Note; and (vii) dividend payments
to DFF on or after the sixth anniversary of the closing date of the Acquisition
for the sole purpose of allowing DFF to make dividend payments to Holdings
immediately upon receipt thereof from the Company for the sole purpose of
allowing Holdings to make dividend payments on the Seller Preferred Stock;
provided that the Fixed Charge Coverage Ratio, after giving effect to such
dividend payments, is greater than 2.5 to 1.0.

"Permitted Transferees" means, with respect to any person, (i) any
Affiliate of such person, (ii) the heirs, executors, administrators,
testamentary trustees, legatees or beneficiaries of any such person, (iii) a
trust, the beneficiaries of which, or a corporation or partnership, the
stockholders or general or limited partners of which, include only such person
or his or her spouse or lineal descendants, in each case to whom such person has
transferred the beneficial ownership of any securities of the Company, (iv) any
investment account whose investment managers and investment advisors consist
solely of such person and/or Permitted Transferees of such person and (v) any
investment fund or investment entity that is a subsidiary of such person or a
Permitted Transferee of such person.

"Person" or "person" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general partnerships, joint
stock companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.

"Plan of Liquidation" means, with respect to any person, a plan that
provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in phases or
otherwise) (i) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such person otherwise than as an entirety or
<PAGE> 30
-22-

substantially as an entirety and (ii) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition and all
or substantially all of the remaining assets of such person to holders of
Capital Stock of such person.

"Preferred Stock" means, with respect to any person, Capital Stock of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such person, over shares
of Capital Stock of any other class of such person.

"principal" of any Indebtedness (including the Securities) means the
principal of such Indebtedness plus the premium, if any, on such Indebtedness.

"Private Placement Legend" means the legend initially set forth on the
Securities in the form set forth in Section 2.14.

"pro forma" means, with respect to any calculation made or required to
be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act of 1933, as amended,
as interpreted by the Company's chief financial officer or Board of Directors in
consultation with its independent certified public accountants.

"Public Equity Offering" means an underwritten public offering of
Common Stock of the Company or Holdings pursuant to a registration statement
filed with the Commission in accordance with the Securities Act; provided,
however, that in the case of a Public Equity Offering by Holdings, Holdings
contributes to the capital of the Company the portion of the net cash proceeds
of such Public Equity Offering necessary to pay the aggregate redemption price
(plus accrued interest to the redemption date) of the Securities to be redeemed
pursuant to Paragraph 5 of the Securities annexed hereto as Exhibit A and
Exhibit B.

"Qualified Capital Stock" means, with respect to any person, any
Capital Stock of such person that is not Disqualified Capital Stock.

"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.

"Record Date" means the Record Dates specified in the Securities;
provided that if any such date is a Legal Holiday, the Record Date shall be the
first day immediately preceding such specified day that is not a Legal Holiday.
<PAGE> 31
-23-

"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture
and Paragraph 5 of the Securities annexed hereto as Exhibit A and Exhibit B.

"Redemption Price," when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
and Paragraph 5 of the Securities annexed hereto as Exhibit A and Exhibit B.

"Reference Date" shall have the meaning provided in Section 5.03.

"Reference Period" shall have the meaning provided in the definition of
"Fixed Charge Coverage Ratio" contained in this Section 1.01.

"Refinancing Indebtedness" means, with respect to any person,
Indebtedness of such person issued in exchange for, or the proceeds from the
issuance and sale or disbursement of which are used to substantially
concurrently repay, redeem, refund, refinance, discharge or otherwise retire for
value, in whole or in part (collectively, "repay"), or constituting an
amendment, modification or supplement to, or a deferral or renewal of
(collectively, an "amendment"), any Indebtedness of such person existing on the
Issue Date or Indebtedness (other than Permitted Indebtedness, except Permitted
Indebtedness incurred pursuant to clauses (a), (c), (d), (h) and (j) of the
definition thereof) incurred in accordance with this Indenture (a) in a
principal amount (or, if such Refinancing Indebtedness provides for an amount
less than the principal amount thereof to be due and payable upon the
acceleration thereof, with an original issue price) not in excess of (without
duplication) (i) the principal amount or the original issue price, as the case
may be, of the Indebtedness so refinanced (or, if such Refinancing Indebtedness
refinances Indebtedness under a revolving credit facility or other agreement
providing a commitment for subsequent borrowings, with a maximum commitment not
to exceed the maximum commitment under such revolving credit facility or other
agreement) plus (ii) unpaid accrued interest on such Indebtedness plus (iii)
premiums, penalties, fees and expenses actually incurred by such person in
connection with the repayment or amendment thereof and (b) with respect to
Refinancing Indebtedness that repays or constitutes an amendment to Subordinated
Indebtedness, such Refinancing Indebtedness (x) shall not have any fixed
mandatory redemption or sinking fund requirement in an amount greater than or at
a time prior to the amounts and times specified in such repaid or amended
Subordinated Indebtedness, except to the extent that any such
<PAGE> 32

-24-

requirement applies on a date after the Maturity Date and (y) shall contain
subordination and default provisions no less favorable in any material respect
to Holders than those contained in such repaid or amended Subordinated
Indebtedness.

"Registrar" shall have the meaning provided in Section 2.03.

"Registration Rights Agreement" means the Registration Rights Agreement
dated as of May 4, 1995, by and among the Company, the Subsidiary Guarantors and
the Initial Purchasers for the benefit of themselves and the Holders as the same
may be amended or modified from time to time in accordance with the terms
thereof.

"Regulation S" means Regulation S under the Securities Act.

"Related Business Investment" means (i) any Investment by a person in
any other person a majority of whose revenues are derived from the operation of
one or more retail grocery stores or supermarkets or any other line of business
engaged in by the Company or any of its Subsidiaries as of the Issue Date; (ii)
any Investment by such person in any cooperative or other supplier, including,
without limitation, any joint venture which is intended to supply any product or
service useful to the business of the Company and its Subsidiaries as it is
conducted as of the Issue Date and as such business may thereafter evolve or
change; and (iii) any capital expenditure or Investment, in each case reasonably
related to the business of the Company and its Subsidiaries as it is conducted
as of the Issue Date and as such business may thereafter evolve or change.

"Representative" means the Administrative Agent under the Senior Credit
Facilities and the indenture trustee or other trustee, agent or representative
for any other Senior Indebtedness; provided that in no event shall United States
Trust Company of New York, in its capacities as Trustee, Registrar, co-Registrar
or Paying Agent, serve as Representative.

"Restricted Debt Prepayment" means any purchase, redemption, defeasance
(including, but not limited to, in-substance or legal defeasance) or other
acquisition or retirement for value, directly or indirectly, by the Company or a
Subsidiary, prior to the scheduled maturity or prior to any scheduled repayment
of principal or sinking fund payment, as the case may be, in respect of
Subordinated Indebtedness.
<PAGE> 33
-25-

"Restricted Payment" means any (i) Stock Payment, (ii) Investment
(other than a Permitted Investment) or (iii) Restricted Debt Prepayment.

"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act.

"Rule 144A" means Rule 144A under the Securities Act.

"Securities" means the Initial Securities and the Exchange Securities.

"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.

"Seller Preferred Stock" means the 15% Redeemable Exchangeable
Cumulative Preferred Stock, Series A of Holdings, par value $.01 per share, with
an initial liquidation preference of $40 million.

"Senior Credit Facilities" means the Credit Agreement dated as of March
22, 1995, among Holdings, DFF Sub, the Company, the Lenders and Arrangers listed
therein and Bankers Trust Company, as administrative agent together with the
documents related thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including adding
Subsidiaries of the Company as additional borrowers or guarantors thereunder)
all or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.

"Senior Indebtedness" means the principal of, premium, if any, and
interest on and all other Obligations with respect to any Indebtedness of the
Company, whether outstanding on the Issue Date or thereafter created, incurred
or assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Securities. Without limiting the generality of the foregoing,
"Senior Indebtedness" shall include (x) the principal of, premium, if any, and
interest on all Obligations of every nature of the Company from time to time
owed to the lenders under the Senior Credit Facilities, including, without
limitation, the
<PAGE> 34
-26-

Letter of Credit Obligations and principal of and interest on and all fees,
indemnities, and expenses payable under the Senior Credit Facilities and (y)
interest accruing thereon subsequent to the occurrence of any Event of Default
specified in clause (vi) or (vii) of Section 7.01 relating to the Company,
whether or not the claim for such interest is allowed under any applicable
Bankruptcy Law. Notwithstanding the foregoing, "Senior Indebtedness" shall not
include (a) Indebtedness evidenced by the Securities, (b) Indebtedness that is
expressly subordinate or junior in right of payment to any Indebtedness of the
Company, (c) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company (other than Capitalized Lease Obligations), (d)
Indebtedness which is represented by Disqualified Capital Stock, (e) obligations
for goods, materials or services purchased in the ordinary course of business or
obligations consisting of trade payables, (f) Indebtedness of or amounts owed by
the Company for compensation to employees or for services rendered to the
Company, (g) any liability for federal, state, local or other taxes owed or
owing by the Company, (h) Indebtedness of the Company to a Subsidiary of the
Company and (i) that portion of any Indebtedness which is incurred by the
Company in violation of this Indenture.

"Significant Senior Indebtedness" means Senior Indebtedness which, at
the time of determination, is equal to or greater than $25 million in aggregate
principal amount.

"Significant Stockholder" means, with respect to any person, any other
person who is the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of more than 10% of any class of equity securities of such person
that are entitled to vote on a regular basis for the election of directors of
such person.

"Significant Subsidiary" means each subsidiary of the Company that is
either (a) a "significant subsidiary" as defined in Rule 1-02(v) of Regulation
S-X under the Securities Act and the Exchange Act (as such regulation is in
effect on the date hereof) or (b) material to the financial condition or results
of operations of the Company and its Subsidiaries taken as a whole.

"Stock Payment" means, with respect to any person, (a) the declaration
or payment by such person, either in cash or in property, of any dividend on
(except, in the case of the Company, dividends payable solely in Qualified
Capital Stock of the Company), or the making by such person or any of its
subsidiaries of any other distribution in respect of, such person's Qualified
Capital Stock or any warrants, rights or options to purchase or
<PAGE> 35
-27-

acquire shares of any class of such Capital Stock (other than exchangeable or
convertible Indebtedness of such person), or (b) the redemption, repurchase,
retirement or other acquisition for value by such person or any of its
subsidiaries, directly or indirectly, of such person's Qualified Capital Stock
(and, in the case of a Subsidiary, Qualified Capital Stock of the Company) or
any warrants, rights or options to purchase or acquire shares of any class of
such Capital Stock (other than exchangeable or convertible Indebtedness of such
person), other than, in the case of the Company, through the issuance in
exchange therefor solely of Qualified Capital Stock of the Company; provided,
however, that in the case of a Subsidiary, the term "Stock Payment" shall not
include any such payment with respect to its Capital Stock or warrants, rights
or options to purchase or acquire shares of any class of its Capital Stock that
are owned solely by the Company or a wholly owned Subsidiary.

"Stock Purchase Agreement" means the Stock Purchase Agreement by and
among Holdings, DFF, Dodi L.L.C., Dodi Family L.L.C., and Dodi Developments
L.L.C., dated as of January 17, 1995, as amended, relating to the sale and
purchase of all of the outstanding Dodi Common Stock and Dodi Preferred Stock.

"Subordinated Indebtedness" means, with respect to the Company or any
Subsidiary Guarantor, Indebtedness of such person which is subordinated in right
of payment to the Securities or the Guarantee of such Subsidiary Guarantor, as
the case may be.

"subsidiary" of any person means (i) a corporation a majority of whose
Capital Stock with voting power, under ordinary circumstances, to elect
directors is, at the date of determination, directly or indirectly, owned by
such person, by one or more subsidiaries of such person or by such person and
one or more subsidiaries of such person or (ii) a partnership in which such
person or a subsidiary of such person is, at the date of determination, a
general partner of such partnership, but only if such person or its subsidiary
is entitled to receive more than 50% of the assets of such partnership upon its
dissolution, or (iii) any other person (other than a corporation or a
partnership) in which such person, a subsidiary of such person or such person
and one or more subsidiaries of such person, directly or indirectly, at the date
of determination, has (x) at least a majority ownership interest or (y) the
power to elect or direct the election of a majority of the directors or other
governing body of such person.

"Subsidiary" means any subsidiary of the Company.
<PAGE> 36
-28-

"Subsidiary Guarantors" means (i) each of Dominick's Finer Foods, Inc.
of Illinois, an Illinois corporation; Dodi Hazelcrest, Inc., a Delaware
corporation; Jerry's Deep Discount Centers, Inc., an Illinois corporation;
Kohl's of Bloomingdale, Inc., an Illinois corporation; and Save-It Discount
Foods Corporation, an Illinois corporation, (ii) each of the Company's
Subsidiaries which becomes a guarantor of the Securities in compliance with the
provisions set forth under Section 5.17 and (iii) each of the Company's
Subsidiaries executing a supplemental indenture in which such Subsidiary agrees
to be bound by the terms of the Security and this Indenture.

"Term Loans" means the term loan facilities under the Senior Credit
Facilities.

"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb), as amended, as in effect on the date of the execution of this
Indenture until such time as this Indenture is qualified under the TIA, and
thereafter as in effect on the date on which this Indenture is qualified under
the TIA, except as otherwise provided in Section 10.03.

"Transaction Date" shall have the meaning provided in the definition of
"Fixed Charge Coverage Ratio" contained in this Section 1.01.

"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.

"Trust Officer" means any officer of the Trustee assigned by the
Trustee to administer its corporate trust matters.

"U.S. Government Obligations" shall have the meaning provided in
Section 9.02.

"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.

"U.S. Physical Securities" has the meaning provided in Section 2.01.

"Voting Stock" means, with respect to any Person, securities of any
class or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any
<PAGE> 37
-29-

contingency) to vote in the election of members of the board of directors or
other governing body of such Person.

"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the product
obtained by multiplying (i) the amount of each then remaining installment,
sinking fund, serial maturity or other required payment of principal, including
payment at final maturity, in respect thereof, by (ii) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment.

"wholly owned Subsidiary" means any corporation, association or other
business entity of which 100% of the total voting power of shares of stock or
other equity interest entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by any Person or one
or more of the other Subsidiaries of that Person or a combination thereof.

"Yucaipa" means The Yucaipa Companies, a California general
partnership, or any successor thereto which is an Affiliate of Ronald W. Burkle
or his Permitted Transferees and which has been established for the sole purpose
of changing the form of The Yucaipa Companies from that of a partnership to that
of a limited liability company or any other form of entity which is not
materially adverse to the rights of the Holders under this Indenture.

SECTION 1.02. Incorporation by Reference of TIA.

Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:

"Commission" means the Securities and Exchange Commission.

"indenture securities" means the Securities.

"indenture security holder" means a Holder or a Securityholder.

"indenture to be qualified" means this Indenture.
<PAGE> 38
-30-

"indenture trustee" or "institutional trustee" means the Trustee.

"obligor" on the indenture securities means the Company, any Subsidiary
Guarantor, or any other obligor on the Securities or the Guarantees.

All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.

SECTION 1.03. Rules of Construction.

Unless the context otherwise requires:

(1) a term has the meaning assigned to it;

(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;

(3) "or" is not exclusive;

(4) words in the singular include the plural, and words in the
plural include the singular;

(5) provisions apply to successive events and transactions;
and

(6) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section
or other subdivision.

ARTICLE TWO

THE SECURITIES

SECTION 2.01. Form and Dating.

The Initial Securities, the notation thereon relating to the Guarantee
and the Trustee's certificate of authentication shall be substantially in the
form of Exhibit A. The Exchange Securities, the notation thereon relating to the
Guarantee and the Trustee's certificate of authentication shall be substantially
in the form of Exhibit B hereto. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or
<PAGE> 39
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usage. The Company and the Trustee shall approve the form of the Securities and
any notation, legend or endorsement on them. Each Security shall be dated the
date of its authentication.

The terms and provisions contained in the Securities annexed hereto as
Exhibits A and B and the Guarantee shall constitute, and are hereby expressly
made, a part of this Indenture and, to the extent applicable, the Company and
the Trustee, by their execution and delivery of this Indenture, expressly agree
to such terms and provisions and to be bound thereby.

Securities offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global securities in registered
form, substantially in the form set forth in Exhibit A (the "Global Security"),
deposited with the Trustee, as custodian for The Depository Trust Company or its
successors (the "Depository"), duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of the
Global Security may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the Depository, as
hereinafter provided.

Securities offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of permanent certificated Securities in
registered form in substantially the form set forth in Exhibit A (the "Offshore
Physical Securities"). Securities offered and sold in reliance on any other
exemption from registration under the Securities Act other than as described in
the preceding paragraph shall be issued, and Securities offered and sold in
reliance on Rule 144A may be issued, in the form of permanent certificated
Securities in registered form, in substantially the form set forth in Exhibit A
(the "U.S. Physical Securities"). The Offshore Physical Securities and the U.S.
Physical Securities are sometimes collectively herein referred to as the
"Physical Securities."

SECTION 2.02. Execution and Authentication.

The Trustee shall authenticate (i) the Initial Securities for original
issue in the aggregate principal amount of up to $200,000,000, and (ii) the
Exchange Securities from time to time for issue only in exchange for a like
principal amount of Initial Securities, in each case upon a written order of the
Company in the form of an Officers' Certificate. The Officers' Certificate shall
specify the amount of Securities to be authenticated and the date on which the
Securities are to be authenticated, whether the Securities are to be Initial
Securities or Exchange Securities, and
<PAGE> 40
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shall further specify the amount of such Securities to be issued as the Global
Security, Offshore Physical Securities or U.S. Physical Securities. The
aggregate principal amount of Securities outstanding at any time may not exceed
$200,000,000, except as provided in Section 2.07. Upon the written order of the
Company in the form of an Officers' Certificate, the Trustee shall authenticate
Securities in substitution of Securities originally issued to reflect any name
change of the Company.

Two Officers, or an Officer and an Assistant Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Securities for the Company by manual or facsimile
signature. Each Subsidiary Guarantor shall execute the Guarantee in the manner
set forth in Section 11.09.

If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless.

A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.

The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.

The Securities shall be issuable only in registered form without
coupons in denominations of $1,000 and integral multiples thereof.

SECTION 2.03. Registrar and Paying Agent.

The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where (a) Securities may be presented or
surrendered for registration of transfer or for exchange ("Registrar"), (b)
Securities may be presented or surrendered for payment ("Paying Agent") and (c)
notices and
<PAGE> 41
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demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, The City of New York, for such purposes. The
Company may act as its own Registrar or Paying Agent except that for the
purposes of Articles Three and Nine and Sections 5.15 and 5.16, neither the
Company nor any Affiliate of the Company shall act as Paying Agent. The
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company, upon notice to the Trustee, may have one or more
co-Registrars and one or more additional paying agents reasonably acceptable to
the Trustee. The term "Paying Agent" includes any additional paying agent. The
Company initially appoints the Trustee as Registrar and Paying Agent until such
time as the Trustee has resigned or a successor has been appointed.

The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall notify
the Trustee, in advance, of the name and address of any such Agent. If the
Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as
such.

SECTION 2.04. Paying Agent to Hold Assets in Trust.

The Company shall require each Paying Agent other than the Trustee to
agree in writing that, subject to Article Four and Article Twelve, each Paying
Agent shall hold in trust for the benefit of Holders or the Trustee all assets
held by the Paying Agent for the payment of principal of, or interest on, the
Securities (whether such assets have been distributed to it by the Company or
any other obligor on the Securities), and shall notify the Trustee of any
Default by the Company (or any other obligor on the Securities) in making any
such payment. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate such assets and hold them as a separate trust fund, subject to Article
Four and Article Twelve. The Company at any time may require a Paying Agent to
distribute all assets held by it to the Trustee and account for any assets
disbursed and the Trustee may at any time during the continuance of any payment
Default, upon written request to a Paying Agent, require such Paying Agent to
distribute all assets held by it to the Trustee and to account for any assets
distributed. Upon distribution to the Trustee of all assets that
<PAGE> 42
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shall have been delivered by the Company to the Paying Agent, the Paying Agent
shall have no further liability for such assets.

SECTION 2.05. Securityholder Lists.

The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee on or before each Interest Payment Date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Holders, which list
may be conclusively relied upon by the Trustee.

SECTION 2.06. Transfer and Exchange.

When Securities are presented to the Registrar or a co- Registrar with
a request to register the transfer of such Securities or to exchange such
Securities for an equal principal amount of Securities of other authorized
denominations, the Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its requirements for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Securities at the Registrar's or co-Registrar's
request. No service charge shall be made for any registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith
(other than any such transfer taxes or similar governmental charge payable upon
exchanges or transfers pursuant to Sections 2.02, 2.07, 2.10, 3.06, 5.15, 5.16
or 10.05). The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Security (i) during a period beginning at the
opening of business 15 days before the mailing of a notice of redemption of
Securities and ending at the close of business on the day of such mailing and
(ii) selected for redemption in whole or in part pursuant to Article Three,
except the unredeemed portion of any Security being redeemed in part.

Any Holder of the Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interests in such Global Security
may be effected only through a book entry system maintained by the Holder of
such Global Security (or its
<PAGE> 43
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agent), and that ownership of a beneficial interest in the Global Security shall
be required to be reflected in a book entry.

SECTION 2.07. Replacement Securities.

If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements are met. If required by the Trustee or
the Company, such Holder must provide an indemnity bond or other indemnity,
sufficient in the judgment of both the Company and the Trustee, to protect the
Company, the Trustee or any Agent from any loss which any of them may suffer if
a Security is replaced. The Company may charge such Holder for its reasonable
out-of-pocket expenses in replacing a Security, including reasonable fees and
expenses of counsel.

Every replacement Security is an additional obligation of the Company.

SECTION 2.08. Outstanding Securities.

Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee except those cancelled by it, those delivered
to it for cancellation and those described in this Section as not outstanding. A
Security does not cease to be outstanding because the Company, the Subsidiary
Guarantors or any of their respective Affiliates holds the Security.

If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section
2.07.

If on a Redemption Date or the Maturity Date the Paying Agent (other
than the Company or a Subsidiary) holds U.S. Legal Tender or U.S. Government
Obligations sufficient to pay all of the principal and interest due on the
Securities payable on that date, then on and after that date such Securities
cease to be outstanding and interest on them ceases to accrue unless, pursuant
to the provisions of Article Four and Article Twelve, the Paying Agent is unable
to make payments on the Securities to the Holders thereof.
<PAGE> 44
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SECTION 2.09. Treasury Securities.

In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company, the Subsidiary Guarantors or any of their respective Affiliates
shall be disregarded, except that, for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Securities that the Trustee actually knows are so owned shall be
disregarded.

SECTION 2.10. Temporary Securities.

Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities.

SECTION 2.11. Cancellation.

The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent
(other than the Company or a Subsidiary), and no one else, shall cancel and, at
the written direction of the Company, shall dispose of all Securities
surrendered for transfer, exchange, payment or cancellation. Subject to Section
2.07, the Company may not issue new Securities to replace Securities that it has
paid or delivered to the Trustee for cancellation. If the Company or any
Subsidiary Guarantor shall acquire any of the Securities, such acquisition shall
not operate as a redemption or satisfaction of the Indebtedness represented by
such Securities unless and until the same are surrendered to the Trustee for
cancellation pursuant to this Section 2.11.

SECTION 2.12. Defaulted Interest.

If the Company defaults in a payment of interest on the Securities, it
shall, unless the Trustee fixes another record date pursuant to Section 7.10,
pay the defaulted interest, plus (to the extent lawful) any interest payable on
the defaulted interest, to the persons who are Holders on a subsequent special
record date, which date shall be the fifteenth day next preceding the date fixed
<PAGE> 45
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by the Company for the payment of defaulted interest or the next succeeding
Business Day if such date is not a Business Day. At least 15 days before the
subsequent special record date, the Company shall mail to each Holder, with a
copy to the Trustee, a notice that states the subsequent special record date,
the payment date and the amount of defaulted interest, and interest payable on
such defaulted interest, if any, to be paid.

SECTION 2.13. CUSIP Number.

The Company in issuing the Securities may use a "CUSIP" number, and if
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities, and that reliance may be placed only
on the other identification numbers printed on the Securities.

SECTION 2.14. Restrictive Legends.

Each Global Security and Physical Security that constitutes a
Restricted Security shall bear the following legend (the "Private Placement
Legend") on the face thereof until May 4, 1998, unless otherwise agreed by the
Company and the Holder thereof:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
(AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN THREE
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL
OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
ISSUER, OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED
ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
<PAGE> 46
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AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE TRUSTEE OR REGISTRAR), (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED
BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN
THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY,
IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND THE ISSUER SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.

Each Global Security shall also bear the following legend on the face
thereof:

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH
SUCCESSOR DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE> 47
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TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF
CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 2.16 OF THE INDENTURE.

SECTION 2.15. Book-Entry Provisions
for Global Security.

(a) The Global Security initially shall (i) be registered in the name
of the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Section 2.14.

Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Security, and the Depository may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of the Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Security.

(b) Transfers of the Global Security shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Security may be
transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depository and the provisions of Section 2.16. In
addition, Physical Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in the Global Security if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for the Global Security and a successor depositary is not appointed
by the Company within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a request from the
Depository to issue Physical Securities.

(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Security to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Securities are to be
issued) reflect on
<PAGE> 48
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its books and records the date and a decrease in the principal amount of the
Global Security in an amount equal to the principal amount of the beneficial
interest in the Global Security to be transferred, and the Company shall
execute, and the Trustee shall authenticate and deliver, one or more Physical
Securities of like tenor and amount.

(d) In connection with the transfer of the entire Global Security to
beneficial owners pursuant to paragraph (b), the Global Security shall be deemed
to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depository in exchange for its beneficial interest in
the Global Security, an equal aggregate principal amount of Physical Securities
of authorized denominations.

(e) Any Physical Security constituting a Restricted Security delivered
in exchange for an interest in the Global Security pursuant to paragraph (b) or
(c) shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of
Section 2.16, bear the legend regarding transfer restrictions applicable to the
Physical Securities set forth in Section 2.14.

(f) The Holder of the Global Security may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.

SECTION 2.16.Special Transfer Provisions.

(a) Transfers to Non-QIB Institutional Accredited Investors and
Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Security constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:

(i) the Registrar shall register the transfer of any Security
constituting a Restricted Security, whether or not such Security bears
the Private Placement Legend, if (x) the requested transfer is after
May 4, 1998, or (y) (1) in the case of a transfer to an Institutional
Accredited Investor which is not a QIB (excluding Non-U.S. Persons),
the proposed transferee has delivered to the Registrar a certificate
substantially in the form of Exhibit C hereto or (2) in the case of a
transfer to a Non-U.S. Person, the proposed transferor has delivered to
the Registrar a certificate substantially in the form of Exhibit D
hereto; and
<PAGE> 49
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(ii) if the proposed transferor is an Agent Member
holding a beneficial interest in the Global Security, upon
receipt by the Registrar of (x) the certificate, if any,
required by paragraph (i) above and (y) instructions given in
accordance with the Depository's and the Registrar's
procedures,

whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Securities)
a decrease in the principal amount of the Global Security in an amount equal to
the principal amount of the beneficial interest in the Global Security to be
transferred, and (b) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Securities of like tenor and
amount.

(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Security constituting
a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):

(i) the Registrar shall register the transfer if such transfer
is being made by a proposed transferor who has checked the box provided
for on the form of Security stating, or has otherwise advised the
Company and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Security stating,
or has otherwise advised the Company and the Registrar in writing, that
it is purchasing the Security for its own account or an account with
respect to which it exercises sole investment discretion and that it
and any such account is a QIB within the meaning of Rule 144A, and is
aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined not
to request such information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A; and

(ii) if the proposed transferee is an Agent Member, and the
Securities to be transferred consist of Physical Securities which after
transfer are to be evidenced by an interest in the Global Security,
upon receipt by the Registrar of instructions given in accordance with
the Depository's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the
principal
<PAGE> 50
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amount of the Global Security in an amount equal to the
principal amount of the Physical Securities to be transferred,
and the Trustee shall cancel the Physical Securities so
transferred.

(c) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless (i) the circumstance contemplated by
paragraph (a)(i)(x) of this Section 2.16 exist or (ii) there is delivered to the
Registrar an Opinion of Counsel reasonably satisfactory to the Company and the
Trustee to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of the
Securities Act.

(d) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.

The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section 2.16.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.

ARTICLE THREE

REDEMPTION

SECTION 3.01. Notices to Trustee.

If the Company elects to redeem Securities pursuant to Paragraph 5 of
the Securities, it shall notify the Trustee, with a copy to the Credit Agent, of
the Redemption Date and the principal amount of Securities to be redeemed and
whether it wants the Trustee to give notice of redemption to the Holders at
least 45 days (unless a shorter notice shall be satisfactory to the Trustee) but
not more than 60 days before the Redemption Date. In order to
<PAGE> 51
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effect a redemption pursuant to Paragraph 5 of the Securities with the proceeds
of a Public Equity Offering, the Company shall send the redemption notice not
later than 60 days after the consummation of such Public Equity Offering. Any
such notice may be cancelled at any time prior to notice of such redemption
being mailed to any Holder and shall thereby be void and of no effect.

SECTION 3.02. Selection of Securities to Be Redeemed.

If fewer than all of the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed by lot, pro rata or by any other
method that the Trustee considers fair and appropriate and in such manner as
complies with any applicable legal requirements and, if such Securities are
listed on any securities exchange, by a method that complies with the
requirements of such exchange; provided, however, that if a partial redemption
is made pursuant to Paragraph 5 of the Securities with the proceeds of a Public
Equity Offering, the selection of the Securities or portions thereof for
redemption shall be made by the Trustee only on a pro rata basis, unless such
method is otherwise prohibited.

The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify the Company
in writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations of $1,000 may be redeemed only in whole.
The Trustee may select for redemption portions (equal to $1,000 or integral
multiples thereof) of the principal amount of Securities that have denominations
larger than $1,000. Provisions of this Indenture that apply to Securities called
for redemption also apply to portions of Securities called for redemption.

SECTION 3.03. Notice of Redemption.

At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first class mail, postage
prepaid, to each Holder whose Securities are to be redeemed at such Holder's
registered address, with a copy to the Credit Agent. In order to effect a
redemption pursuant to Paragraph 5 of the Securities with the proceeds of a
Public Equity Offering, the Company shall send the redemption notice not later
than 60 days after the consummation of such Public Equity Offering. At the
Company's request, the Trustee shall give the notice of redemption in the
Company's name and at the Company's expense. Each notice for redemption shall
identify the Securities to be redeemed and shall state:
<PAGE> 52
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(1) the Redemption Date;

(2) the Redemption Price;

(3) the name and address of the Paying Agent;

(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the Redemption Price;

(5) that, unless (a) the Company defaults in making the
redemption payment or (b) such redemption payment is prohibited
pursuant to Article Four or Article Twelve hereof or otherwise,
interest on Securities called for redemption ceases to accrue on and
after the Redemption Date, and the only remaining right of the Holders
of such Securities is to receive payment of the Redemption Price upon
surrender to the Paying Agent of the Securities redeemed;

(6) if any Security is being redeemed in part, the portion of
the principal amount of such Security to be redeemed and that, after
the Redemption Date, and upon surrender of such Security, a new
Security or Securities in aggregate principal amount equal to the
unredeemed portion thereof will be issued; and

(7) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be
outstanding after such partial redemption.

SECTION 3.04. Effect of Notice of Redemption.

Once notice of redemption is mailed in accordance with Section 3.03,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price. Upon surrender to the Trustee or Paying Agent, such
Securities called for redemption shall be paid at the Redemption Price unless
prohibited pursuant to Article Four or Article Twelve or otherwise pursuant to
this Indenture. Securities that are redeemed by the Company or that are
purchased by the Company pursuant to a Net Proceeds Offer as described in
Section 5.16 or pursuant to a Change of Control Offer as described in Section
5.15 or that are otherwise acquired by the Company will be surrendered to the
Trustee for cancellation.
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SECTION 3.05. Deposit of Redemption Price.

On or before the Redemption Date, the Company shall deposit with the
Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price of all
Securities to be redeemed on that date (other than Securities or portions
thereof called for redemption on that date which have been delivered by the
Company to the Trustee for cancellation). The Paying Agent shall promptly return
to the Company any U.S. Legal Tender so deposited which is not required for that
purpose upon the written request of the Company, except with respect to monies
owed as obligations to the Trustee pursuant to Article Eight and Article Twelve
hereof.

If the Company complies with the preceding paragraph and payment of the
Securities called for redemption is not prohibited under Article Four or Article
Twelve or otherwise, then, unless the Company defaults in the payment of such
Redemption Price, interest on the Securities or portions thereof to be redeemed
will cease to accrue on and after the applicable Redemption Date, whether or not
such Securities are presented for payment.

SECTION 3.06. Securities Redeemed in Part.

Upon surrender of a Security that is to be redeemed in part, the
Trustee shall authenticate for the Holder a new Security or Securities equal in
principal amount to the unredeemed portion of the Security surrendered.

ARTICLE FOUR

SUBORDINATION

SECTION 4.01. Securities Subordinated to Senior Indebtedness.

Anything herein to the contrary notwithstanding, the Company, for
itself and its successors, and each Holder, by his acceptance of Securities,
agrees that the payment of any Obligations under the Securities is subordinated,
to the extent and in the manner provided in this Article Four, to the prior
payment in full in cash or Cash Equivalents of all Senior Indebtedness.

This Article Four shall constitute a continuing offer to all persons
who become holders of, or continue to hold, Senior Indebtedness, and such
provisions are made for the benefit of the holders of Senior Indebtedness and
such holders are made obligees hereunder and any one or more of them may enforce
such provisions.
<PAGE> 54
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SECTION 4.02. Suspension of Payment When Senior
Indebtedness in Default.

(a) Unless Section 4.03 shall be applicable, upon (1) the occurrence of
a Payment Default and (2) receipt by the Trustee and the Company from the
Representatives of written notice of such occurrence, then no direct or indirect
payment (other than payments previously made pursuant to Article Nine hereof) or
distribution of any assets of the Company of any kind or character shall be made
by or on behalf of the Company on account of any Obligations under the
Securities, whether pursuant to the terms of the Securities or upon acceleration
or otherwise, or on account of the purchase or redemption or other acquisition
of Securities unless and until such Payment Default shall have been cured or
waived by or on behalf of the holders of the Designated Senior Indebtedness or
Significant Senior Indebtedness, as the case may be, or shall have ceased to
exist or such Senior Indebtedness as to which such Payment Default relates shall
have been discharged or paid in full, after which the Company shall resume
making any and all required payments in respect of the Securities, including any
missed payments.

(b) Unless Section 4.03 shall be applicable, upon (1) the occurrence of
a Non-payment Default and (2) the earlier of (i) receipt by the Trustee and the
Company from the holders of a majority of the outstanding principal amount of
the Designated Senior Indebtedness or their Representative of written notice of
such occurrence stating that such notice is a "Payment Blockage Notice" pursuant
to Section 4.02(b) of this Indenture or (ii) if such Non-payment Default results
from the acceleration of the Securities, the date of such acceleration, no
payment (other than payments previously made pursuant to Article Nine hereof) or
distribution of any assets of the Company of any kind or character shall be made
by the Company on account of any Obligations under the Securities or on account
of the purchase or redemption or other acquisition of Securities for a period
("Payment Blockage Period") commencing on the date of receipt by the Trustee of
the written notice of a Non-payment Default from the Representative or the date
of the acceleration referred to in clause (ii) above, as the case may be, unless
and until the earlier to occur of the following events: (w) 179 days shall have
elapsed since receipt of such notice or the date of the acceleration of the
Securities, as the case may be (provided such Designated Senior Indebtedness
shall theretofore not have been accelerated), (x) such Non-payment Default shall
have been cured or waived or shall have ceased to exist, (y) such Designated
Senior Indebtedness shall have been discharged or paid in full in cash or Cash
Equivalents or (z) such Payment Blockage Period shall have been terminated by
written
<PAGE> 55
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notice to the Company or the Trustee from the Representative initiating such
Payment Blockage Period or the holders of at least a majority of the outstanding
principal amount of such issue of Designated Senior Indebtedness initiating such
Payment Blockage Period, after which, in the case of clause (w), (x), (y) or
(z), the Company shall resume making any and all required payments in respect of
the Securities, including any missed payments. Notwithstanding any other
provision of this Indenture, only one Payment Blockage Period may be commenced
within any consecutive 365-day period and no Non-payment Default with respect to
Designated Senior Indebtedness which existed or was continuing on the date of
the commencement of any Payment Blockage Period shall be, or shall be made, the
basis for the commencement of a second Payment Blockage Period, whether or not
within a period of 365 consecutive days, unless such event of default shall have
been cured or waived for a period of not less than 90 consecutive days. In no
event shall a Payment Blockage Period extend beyond 179 days from the date of
the receipt of the written notice by the Trustee of a Non-payment Default or the
date of the acceleration of the Securities, as the case may be.

(c) In the event that, notwithstanding the foregoing, the Trustee or
the Holder of any Security shall have received any payment prohibited by the
foregoing provisions of this Section 4.02, then and in such event such payment
shall be segregated from other funds and held in trust by the Trustee or such
Holder or Paying Agent for the benefit of, and shall immediately be paid over to
the holders of Senior Indebtedness or to the Representatives or as a court of
competent jurisdiction shall direct.

SECTION 4.03. Securities Subordinated to Prior Payment of
All Senior Indebtedness on Dissolution,
Liquidation or Reorganization of Company.

Upon any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, upon any dissolution,
winding-up, total or partial liquidation or reorganization of the Company
(including, without limitation, in bankruptcy, insolvency or receivership
proceedings or upon any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company and whether voluntary or
involuntary):

(a) the holders of all Senior Indebtedness shall first be
entitled to receive payments in full in cash or Cash Equivalents of all
amounts payable under Senior Indebtedness (including, with respect to
Designated Senior Indebtedness or
<PAGE> 56
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Significant Senior Indebtedness, any interest accruing after
the commencement of any such proceeding at the rate specified
in the applicable Designated Senior Indebtedness or
Significant Senior Indebtedness whether or not interest is an
allowed claim enforceable against the Company in any such
proceeding) before the Holders will be entitled to receive any
payment with respect to the Securities, and until all
Obligations with respect to the Senior Indebtedness are paid
in full in cash or Cash Equivalents, any distribution to which
the Holders would be entitled shall be made to the holders of
Senior Indebtedness; provided, however, that no payment on any
Guarantee shall constitute payment on behalf of the Company
for purposes of this Section 4.03(a);

(b) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to
which the Holders or the Trustee on behalf of the Holders would be
entitled except for the provisions of this Article Four, shall be paid
by the liquidating trustee or agent or other person making such a
payment or distribution, directly to the holders of Senior Indebtedness
or their Representatives, ratably according to the respective amounts
of Senior Indebtedness remaining unpaid held or represented by each,
until all Senior Indebtedness remaining unpaid shall have been paid in
full in cash or Cash Equivalents after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness; and

(c) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, shall be received
by the Trustee or the Holders or any Paying Agent on account of any
Obligations under the Securities before all Senior Indebtedness is paid
in full in cash or Cash Equivalents, such payment or distribution
(subject to the provisions of Sections 4.06 and 4.07) shall be
received, segregated from other funds, and held in trust by the Trustee
or such Holder or Paying Agent for the benefit of, and shall
immediately be paid over to, the holders of Senior Indebtedness or
their Representatives, ratably according to the respective amounts of
Senior Indebtedness held or represented by each, until all Senior
Indebtedness remaining unpaid shall have been paid in full in cash or
Cash Equivalents, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.

The consolidation of the Company with, or the merger of the Company
with or into, another person or the liquidation or
<PAGE> 57
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dissolution of the Company following the conveyance, transfer or lease of its
properties and assets substantially as an entirety to another person upon the
terms and conditions set forth in Article Six hereof shall not be deemed a
dissolution, winding-up, liquidation, reorganization, assignment for the benefit
of creditors or marshaling of assets and liabilities of the Company for the
purposes of this Article Four if the person formed by such consolidation or the
surviving entity of such merger or the person which acquires by conveyance,
transfer or lease such properties and assets substantially as an entirety, as
the case may be, shall, as a part of such consolidation, merger, conveyance,
transfer or lease, comply with the conditions set forth in such Article Six.

The Company shall give prompt notice to the Trustee prior to any
dissolution, winding-up, total or partial liquidation or reorganization
(including, without limitation, in bankruptcy, insolvency, or receivership
proceedings or upon any assignment for the benefit of creditors or any other
marshalling of the Company's assets and liabilities).

SECTION 4.04. Securityholders to Be Subrogated to Rights
of Holders of Senior Indebtedness.

Subject to the payment in full in cash or Cash Equivalents of all
Senior Indebtedness, the Holders of Securities shall be subrogated to the rights
of the holders of Senior Indebtedness to receive payments or distributions of
assets of the Company applicable to the Senior Indebtedness until all amounts
owing on the Securities shall be paid in full in cash, and for the purpose of
such subrogation no payments or distributions to the holders of Senior
Indebtedness by or on behalf of the Company, or by or on behalf of the Holders
by virtue of this Article Four, which otherwise would have been made to the
Holders, shall, as between the Company and the Holders, be deemed to be payment
by the Company to or on account of the Senior Indebtedness, it being understood
that the provisions of this Article Four are and are intended solely for the
purpose of defining the relative rights of the Holders, on the one hand, and the
holders of Senior Indebtedness, on the other hand.

If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article Four shall have been
applied, pursuant to the provisions of this Article Four, to the payment of all
amounts payable under the Senior Indebtedness, then the Holders shall be
entitled to receive from the holders of such Senior Indebtedness any payments or
distributions received by such holders of Senior Indebtedness in excess of the
amount sufficient to pay all amounts payable under or
<PAGE> 58
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in respect of the Senior Indebtedness in full in cash or Cash Equivalents.

SECTION 4.05. Obligations of the Company Unconditional.

Nothing contained in this Article Four or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as between the Company and
the Holders, the obligation of the Company, which is absolute and unconditional,
to pay to the Holders the principal of and interest on the Securities as and
when the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders and creditors of
the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Trustee or any Holder from exercising all
remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article Four, of the
holders of Senior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy. Upon any payment or
distribution of assets or securities of the Company referred to in this Article
Four, the Trustee, subject to the provisions of Sections 8.01 and 8.02, and the
Holders shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which any dissolution, winding-up, liquidation or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidating trustee or agent or other person making any
payment or distribution to the Trustee or to the Holders or a certificate of the
Representatives for the purpose of ascertaining the persons entitled to
participate in such payment or distribution, the holders of Senior Indebtedness
and other Indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Four. Nothing in this Section 4.05 shall apply to the
claims of, or payments to, the Trustee under or pursuant to Section 8.07.

SECTION 4.06. Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice.

The Trustee shall not at any time be charged with knowledge of the
existence of any facts that would prohibit the making of any payment to or by
the Trustee unless and until the Trustee or any Paying Agent shall have received
written notice thereof from the Company or from one or more holders of Senior
Indebtedness or from any Representative therefor and, prior to the receipt of
any such notice, the Trustee shall be entitled in all respects conclusively to
assume that no such fact exists.
<PAGE> 59
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SECTION 4.07. Application by Trustee of Assets Deposited
with It.

U.S. Legal Tender or U.S. Government Obligations deposited in trust
with the Trustee pursuant to and in accordance with Section 9.02 shall be for
the sole benefit of Securityholders and, to the extent allocated for the payment
of Securities, shall not be subject to the subordination provisions of this
Article Four. Otherwise, any deposit of assets or securities by or on behalf of
the Company with the Trustee or any Paying Agent (whether or not in trust) for
the payment of principal of or interest on any Securities shall be subject to
the provisions of this Article Four; provided that if prior to the second
Business Day preceding the date on which by the terms of this Indenture any such
assets may become distributable for any purpose (including, without limitation,
the payment of either principal of or interest on any Security) the Trustee or
such Paying Agent shall not have received with respect to such assets the notice
provided for in Section 4.06, then the Trustee or such Paying Agent shall have
full power and authority to receive such assets and to apply the same to the
purpose for which they were received, and shall not be affected by any notice to
the contrary received by it on or after such date; provided, further, that no
payment on any Guarantee shall constitute payment on behalf of the Company for
purposes of this Section 4.07. The foregoing shall not apply to the Paying Agent
if the Company or any Subsidiary or Affiliate of the Company is acting as Paying
Agent. Nothing contained in this Section 4.07 shall limit the right of the
holders of Senior Indebtedness to recover payments as contemplated by this
Article Four.

SECTION 4.08. No Waiver of Subordination Provisions.

(a) No right of any present or future holder of any Senior Indebtedness
to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act by any such holder, or by any non-compliance by
the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.

(b) Without limiting the generality of subsection (a) of this Section
4.08, the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
Four or the obligations hereunder of the Holders of the Securities
<PAGE> 60
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to the holders of Senior Indebtedness, do any one or more of the following: (1)
change the manner, place, terms or time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (2) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (3) release any person liable in any manner for the collection or
payment of Senior Indebtedness; and (4) exercise or refrain from exercising any
rights against the Company and any other person.

SECTION 4.09. Securityholders Authorize Trustee to
Effectuate Subordination of Securities.

Each Holder of the Securities by his acceptance thereof authorizes and
expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effect the subordination provisions contained in
this Article Four, and appoints the Trustee his attorney-in-fact for such
purpose, including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company) tending towards
liquidation or reorganization of the business and assets of the Company, the
immediate filing of a claim for the unpaid balance of its or his Securities in
the form required in said proceedings and cause said claim to be approved. If
the Trustee does not file a proper claim or proof of debt in the form required
in such proceeding prior to 30 days before the expiration of the time to file
such claim or claims, then any of the holders of the Senior Indebtedness or
their Representatives is hereby authorized to file an appropriate claim for and
on behalf of the Holders of said Securities. Nothing herein contained shall be
deemed to authorize the Trustee or the holders of Senior Indebtedness or their
Representative to authorize or consent to or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee or the holders of Senior Indebtedness or their
Representative to vote in respect of the claim of any Securityholder in any such
proceeding.

SECTION 4.10. Right of Trustee to Hold Senior Indebtedness.

The Trustee shall be entitled to all of the rights set forth in this
Article Four in respect of any Senior Indebtedness at any time held by it to the
same extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall be
<PAGE> 61
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construed to deprive the Trustee of any of its rights as such holder.

SECTION 4.11. No Suspension of Remedies.

The failure to make a payment on account of principal of or interest on
the Securities by reason of any provision of this Article Four shall not be
construed as preventing the occurrence of a Default or an Event of Default under
Section 7.01.

Nothing contained in this Article Four shall limit the right of the
Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to Article Seven or to pursue any rights or
remedies hereunder or under applicable law, subject to the rights, if any, under
this Article Four of the holders, from time to time, of Senior Indebtedness.

SECTION 4.12. No Fiduciary Duty of Trustee to Holders of
Senior Indebtedness.

The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness, and shall not be liable to any such holders
(other than for its willful misconduct or gross negligence) if it shall pay over
or deliver to the Holders of Securities or the Company or any other person,
money or assets in compliance with the terms of this Indenture. Nothing in this
Section 4.12 shall affect the obligation of any person other than the Trustee to
hold such payment for the benefit of, and to pay such payment over to, the
holders of Senior Indebtedness or their Representative.

ARTICLE FIVE

COVENANTS

SECTION 5.01. Payment of Securities.

The Company shall pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities. An installment of
principal of or interest on the Securities shall be considered paid on the date
it is due if the Trustee or Paying Agent (other than the Company or a
Subsidiary) holds on that date U.S. Legal Tender designated for and sufficient
to pay the installment; provided, however, that U.S. Legal Tender held by the
Trustee for the benefit of holders of Senior
<PAGE> 62
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Indebtedness or Guarantor Senior Indebtedness or the payment of which to the
Holders is prohibited pursuant to the provisions of Article Four or Article
Twelve or otherwise shall not be considered to be designated for the payment of
any installment of principal or interest on the Securities within the meaning of
this Section 5.01.

The Company shall pay interest on overdue principal at the rate borne
by the Securities and it shall pay interest on overdue installments of interest
at the same rate, to the extent lawful.

SECTION 5.02. Maintenance of Office or Agency.

The Company shall maintain in the Borough of Manhattan, The City of New
York, the office or agency required under Section 2.03. The Company shall give
prior notice to the Trustee of the location, and any change in the location, of
such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the address of the Trustee set forth in Section 13.02.

SECTION 5.03. Limitation on Restricted Payments.

The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, make any Restricted Payment if, at the
time of such proposed Restricted Payment, or after giving effect thereto, (a) a
Default or an Event of Default shall have occurred and be continuing, (b) the
Company could not incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 5.12 or (c) the aggregate amount expended for
all Restricted Payments, including such proposed Restricted Payment (the amount
of any Restricted Payment, if other than cash, to be the fair market value
thereof at the date of payment, as determined in good faith by the Board of
Directors of the Company), subsequent to the Issue Date, shall exceed the sum of
(i) 50% of the aggregate Consolidated Net Income (or if such Consolidated Net
Income is a loss, minus 100% of such loss) of the Company earned subsequent to
the Issue Date and on or prior to the date of the proposed Restricted Payment
(the "Reference Date"), plus (ii) 100% of the aggregate Net Proceeds received by
the Company from any person (other than a Subsidiary of the Company) from the
issuance and sale (including upon exchange or conversion for other securities of
the Company) subsequent to the Issue Date and on or prior to the Reference Date
of Qualified Capital Stock (excluding (A) Qualified Capital Stock paid as a
dividend on any Capital Stock or as interest on any Indebtedness and (B) any Net
<PAGE> 63
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Proceeds from issuances and sales financed directly or indirectly using funds
borrowed from the Company or any Subsidiary, until and to the extent such
borrowing is repaid), plus (iii) 100% of the aggregate net cash proceeds
received by the Company as capital contributions to the Company after the Issue
Date, plus (iv) $10 million.

Notwithstanding the foregoing, if no Default or Event of Default shall
have occurred and be continuing as a consequence thereof, the provisions set
forth in the immediately preceding paragraph will not prevent (1) the payment of
any dividend within 60 days after the date of its declaration if the dividend
would have been permitted on the date of declaration, (2) the acquisition of any
shares of Capital Stock of the Company or the repurchase, redemption or other
repayment of any Subordinated Indebtedness in exchange for or solely out of the
proceeds of the substantially concurrent sale (other than to a Subsidiary) of
shares of Qualified Capital Stock of the Company, (3) the repurchase, redemption
or other repayment of any Subordinated Indebtedness in exchange for or solely
out of the proceeds of the substantially concurrent sale (other than to a
Subsidiary) of Subordinated Indebtedness of the Company with a Weighted Average
Life to Maturity equal to or greater than the then remaining Weighted Average
Life to Maturity of the Subordinated Indebtedness repurchased, redeemed or
repaid, and (4) Permitted Payments; provided, however, that the declaration of
each dividend paid in accordance with clause (1) above, each acquisition,
repurchase, redemption or other repayment made in accordance with, or of the
type set forth in, clause (2) above, and each payment described in clause (iii),
(v) or (vii) of the definition of the term "Permitted Payments" shall each be
counted for purposes of computing amounts expended pursuant to subclause (c) in
the immediately preceding paragraph, and no amounts expended pursuant to clause
(3) above or pursuant to clause (i), (ii), (iv) or (vi) of the definition of the
term "Permitted Payments" shall be so counted.

Prior to making any Restricted Payment under the first paragraph of
this Section 5.03, the Company shall deliver to the Trustee an Officers'
Certificate setting forth the computation by which the amount available for
Restricted Payments pursuant to such paragraph was determined. The Trustee shall
have no duty or responsibility to determine the accuracy or correctness of this
computation and shall be fully protected in relying on such Officers'
Certificate.
<PAGE> 64
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SECTION 5.04. Corporate Existence.

Except as otherwise permitted by Article Six, the Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate or other existence of each of
its Subsidiaries in accordance with the respective organizational documents of
each such Subsidiary and the rights (charter and statutory) and franchises of
the Company and each such Subsidiary; provided, however, that the Company shall
not be required to preserve, with respect to itself, any right or franchise, and
with respect to any of its Subsidiaries, any such existence, right or franchise,
if the Board of Directors of the Company or such Subsidiary, as the case may be,
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company or any such Subsidiary.

SECTION 5.05. Payment of Taxes and Other Claims.

The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon it or any of its Subsidiaries or
properties of it or any of its Subsidiaries and (ii) all lawful claims for
labor, materials and supplies that, if unpaid, might by law become a Lien upon
the property of it or any of its Subsidiaries; provided, however, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim if either (a) the amount,
applicability or validity thereof is being contested in good faith by
appropriate proceedings and an adequate reserve has been established therefor to
the extent required by GAAP or (b) the failure to make such payment or effect
such discharge (together with all other such failures) would not have a material
adverse effect on the financial condition or results or operations of the
Company and its Subsidiaries taken as a whole.

SECTION 5.06. Maintenance of Properties and Insurance.

(a) The Company shall cause all properties used or useful to the
conduct of its business or the business of any of its Subsidiaries to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in its
judgment may be necessary, so that the business carried on in connection
therewith may be properly and advantageously conducted
<PAGE> 65
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at all times unless the failure to so maintain such properties (together with
all other such failures) would not have a material adverse effect on the
financial condition or results of operations of the Company and its Subsidiaries
taken as a whole; provided, however, that nothing in this Section 5.06 shall
prevent the Company or any Subsidiary from discontinuing the operation or
maintenance of any of such properties, or disposing of any of them, if such
discontinuance or disposal is either (i) in the ordinary course of business,
(ii) in the good faith judgment of the Board of Directors of the Company or the
Subsidiary concerned, or of the senior officers of the Company or such
Subsidiary, as the case may be, desirable in the conduct of the business of the
Company or such Subsidiary, as the case may be, or (iii) is otherwise permitted
by this Indenture.

(b) The Company shall provide or cause to be provided, for itself and
each of its Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds that, in the reasonable, good faith opinion
of the Company are adequate and appropriate for the conduct of the business of
the Company and such Subsidiaries in a prudent manner, with reputable insurers
or with the government of the United States of America or an agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as shall be either (i) consistent with past practices of the Company or
the applicable Subsidiary or (ii) customary, in the reasonable, good faith
opinion of the Company, for corporations similarly situated in the industry,
unless the failure to provide such insurance (together with all other such
failures) would not have a material adverse effect on the financial condition or
results of operations of the Company and its Subsidiaries, taken as a whole.

SECTION 5.07. Compliance Certificate; Notice of Default.

(a) The Company shall deliver to the Trustee within 120 days after the
end of the Company's fiscal year an Officers' Certificate stating that a review
of its activities and the activities of its Subsidiaries during the preceding
fiscal year has been made under the supervision of the signing Officers with a
view to determining whether it has kept, observed, performed and fulfilled its
obligations under this Indenture and further stating, as to each such Officer
signing such certificate, that to the best of his knowledge the Company during
such preceding fiscal year has kept, observed, performed and fulfilled each and
every such covenant and no event of default in respect of any payment obligation
under the Senior Credit Facilities, Default or Event of Default occurred during
such year or, if such signers do know of such an event of default, Default or
Event of Default, the
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certificate shall describe the event of default, Default or Event of Default and
its status with particularity. The Officers' Certificate shall also notify the
Trustee should the Company elect to change the manner in which it fixes its
fiscal year end.

(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the Company shall deliver to
the Trustee within 120 days after the end of each fiscal year a written
statement by the Company's independent certified public accountants stating (A)
that their audit examination has included a review of the terms of this
Indenture and the Securities as they relate to accounting matters, and (B)
whether, in connection with their audit examination, any Default has come to
their attention and if such a Default has come to their attention, specifying
the nature and period of existence thereof.

(c) The Company shall deliver to the Trustee, forthwith upon becoming
aware, and in any event within 5 days after the occurrence, of (i) any Default
or Event of Default in the performance of any covenant, agreement or condition
contained in this Indenture; (ii) any event of default in respect of any payment
obligation under the Senior Credit Facilities or any event of default under any
other bond, debenture, note, or other evidence of Indebtedness of the Company or
any of its Subsidiaries, or under any mortgage, indenture or other instrument if
such event of default related to Indebtedness at any time in an aggregate
principal amount exceeding $20 million, an Officers' Certificate specifying with
particularity such event.

SECTION 5.08. Compliance with Laws.

The Company shall comply, and shall cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except such as are being contested in good faith and by appropriate
proceedings and except for such noncompliances as would not in the aggregate
have a material adverse effect on the financial condition or results of
operations of the Company and its Subsidiaries taken as a whole.
<PAGE> 67
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SECTION 5.09. SEC Reports.

The Company shall deliver to the Trustee within 15 days after the
filing of the same with the Commission, copies of the quarterly and annual
report and of the information, documents and other reports, if any, which the
Company is required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall file with the Commission, to the extent permitted by law or regulation,
and provide the Trustee and Holders of Securities with such quarterly and annual
reports and such information, documents and other reports specified in Section
13 and 15(d) of the Exchange Act. The Company shall also comply with the other
provisions of TIA Section 314(a).

SECTION 5.10. Waiver of Stay, Extension or Usury Laws.

The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.

SECTION 5.11. Limitation on Transactions with Affiliates.

(a) The Company shall not, and shall not cause or permit any of its
Subsidiaries to, (i) sell, lease, transfer or otherwise dispose of any of its
properties or assets, or issue securities (other than equity securities which do
not constitute Disqualified Capital Stock), (ii) purchase any property, assets
or securities from, (iii) make any Investment in, or (iv) enter into or suffer
to exist any contract or agreement with or for the benefit of, an Affiliate or
Significant Stockholder (or any Affiliate of such Significant Stockholder) of
the Company or any Subsidiary (an "Affiliate Transaction"), other than (x)
Affiliate Transactions permitted under Section 5.11(b) and (y) Affiliate
Transactions in the ordinary course of business that are fair to the Company or
such Subsidiary, as the case may be, and on terms at least as
<PAGE> 68
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favorable as might reasonably have been obtainable at such time from an
unaffiliated party; provided that (A) with respect to Affiliate Transactions
involving aggregate payments in excess of $1 million and less than $5 million,
the Company or such Subsidiary, as the case may be, shall have delivered an
Officers' Certificate to the Trustee certifying that such transaction or series
of transactions complies with clause (y) above (other than the requirement set
forth in such clause (y) that such Affiliate Transaction be in the ordinary
course of business), (B) with respect to Affiliate Transactions involving
aggregate payments in excess of $5 million and less than $10 million, the
Company or such Subsidiary, as the case may be, shall have delivered an
Officers' Certificate to the Trustee certifying that such Affiliate Transaction
complies with clause (y) above and (other than the requirement set forth in such
clause (y) that such Affiliate Transaction be in the ordinary course of
business), that such Affiliate Transaction has received the approval of a
majority of the disinterested members of the Board of Directors of the Company
or the Subsidiary, as the case may be, or in the absence of any such approval by
the disinterested members of the Board of Directors of the Company or the
Subsidiary, as the case may be, that an Independent Financial Advisor has
reasonably and in good faith determined that the financial terms of such
Affiliate Transaction are fair to the Company or such Subsidiary, as the case
may be, or that the terms of such Affiliate Transaction are at least as
favorable as might reasonably have been obtained at such time from an
unaffiliated party and that such Independent Financial Advisor has provided
written confirmation of such determination to the Board of Directors of the
Company or such Subsidiary, as the case may be, and (C) with respect to
Affiliate Transactions involving aggregate payments in excess of $10 million,
the Company or such Subsidiary, as the case may be, shall have delivered to the
Trustee a written opinion from an Independent Financial Advisor to the effect
that the financial terms of such Affiliate Transaction are fair to the Company
or such Subsidiary, as the case may be, or that the terms of such Affiliate
Transaction are at least as favorable as those that might reasonably have been
obtained at the time from an unaffiliated party.

(b) The provisions of Section 5.11(a) shall not apply to (i) any
Permitted Payment, (ii) any Restricted Payment that is made in compliance with
the provisions of Section 5.03, (iii) reasonable and customary fees and
compensation paid to, and indemnity provided on behalf of, officers, directors,
employees or consultants of the Company or any Subsidiary, as determined by the
Board of Directors of the Company or any Subsidiary or the senior management
thereof in good faith, (iv) transactions exclusively between or among the
Company and any of its wholly owned Subsidiaries or exclusively
<PAGE> 69
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between or among such wholly owned Subsidiaries, provided such transactions are
not otherwise prohibited by this Indenture, (v) any agreement as in effect as of
the Issue Date or any agreements similar thereto or any amendment thereto or any
transaction contemplated thereby (including pursuant to any amendment thereto)
so long as any such amendment is not disadvantageous to the Securityholders in
any material respect, (vi) the existence of, or the performance by the Company
or any of its Subsidiaries of its obligations under the terms of, any
stockholder agreement (including any registration rights agreement or purchase
agreement related thereto) to which it (or Holdings) is a party as of the Issue
Date and any similar agreements which it (or Holdings) may enter into
thereafter; provided, however, that the existence of, or the performance by the
Company or any Subsidiaries of obligations under any future amendment to, any
such existing agreement or under any similar agreement entered into after the
Issue Date shall only be permitted by this clause (vi) to the extent that the
terms of any such amendment or new agreement are not otherwise disadvantageous
to the Securityholders in any material respect, (vii) transactions permitted by,
and complying with, the provisions of Section 6.01 and (viii) transactions with
suppliers or other purchases or sales of goods or services, in each case, in the
ordinary course of business (including, without limitation, pursuant to joint
venture agreements) and otherwise in compliance with the terms of this Indenture
which are fair to the Company, in the reasonable determination of the Board of
Directors of the Company or the senior management thereof, or are on terms at
least as favorable as might reasonably have been obtained at such time from an
unaffiliated party.

SECTION 5.12. Limitation on Incurrences of
Additional Indebtedness.

The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, incur, assume, guarantee, become
liable, contingently or otherwise, with respect to, or otherwise become
responsible for the payment of (collectively "incur"), any Indebtedness other
than Permitted Indebtedness; provided, however, that if no Default with respect
to payment of principal of, or interest on, the Securities or Event of Default
shall have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company or any Subsidiary Guarantor may
incur Indebtedness if immediately before and immediately after giving effect to
the incurrence of such Indebtedness the Fixed Charge Coverage Ratio of the
Company would be greater than 2.0 to 1.0; provided further a Subsidiary may
incur Acquired Indebtedness to the extent such
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Indebtedness could have been incurred by the Company pursuant to the immediately
preceding proviso.

SECTION 5.13. Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries.

The Company shall not, and shall not cause or permit any Subsidiary to,
directly or indirectly, create or suffer to exist, or allow to become effective
any consensual Payment Restriction with respect to any of its Subsidiaries,
except for (a) any such restrictions contained in (i) the Senior Credit
Facilities in effect on the Issue Date, as any such payment restriction may
apply to any present or future Subsidiary, (ii) this Indenture and any agreement
in effect at or entered into on the Issue Date, (iii) Indebtedness of a person
existing at the time such person becomes a Subsidiary (provided that (x) such
Indebtedness is not incurred in connection with, or in contemplation of, such
person becoming a Subsidiary, (y) such restriction is not applicable to any
person, or the properties or assets or any person, other than the person so
acquired and (z) such Indebtedness is otherwise permitted to be incurred
pursuant to Section 5.12), (iv) secured Indebtedness otherwise permitted to be
incurred pursuant to Sections 5.12 and 5.14 that limit the right of the debtor
to dispose of the assets securing such Indebtedness; (b) customary
non-assignment provisions restricting subletting or assignment of any lease or
other agreement entered into by a Subsidiary; (c) customary net worth provisions
contained in leases and other agreements entered into by a Subsidiary in the
ordinary course of business; (d) customary restrictions with respect to a
Subsidiary pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
Subsidiary; (e) customary provisions in joint venture agreements and other
similar agreements; (f) restrictions contained in Indebtedness incurred to
refinance, refund, extend or renew Indebtedness referred to in clause (a) above;
provided that the restrictions contained therein are not materially more
restrictive taken as a whole than those provided for in such Indebtedness being
refinanced, refunded, extended or renewed and (g) Payment Restrictions contained
in any other Indebtedness permitted to be incurred subsequent to the Issue Date
pursuant to the provisions of Section 5.12; provided that any such Payment
Restrictions are ordinary and customary with respect to the type of Indebtedness
being incurred (under the relevant circumstances) and, in any event, no more
restrictive than the most restrictive Payment Restrictions in effect on the
Issue Date.
<PAGE> 71
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SECTION 5.14. Limitation on Liens.

The Company shall not, and shall not cause or permit any Subsidiary to,
directly or indirectly, create, incur, assume or suffer to exist any Liens upon
any of their respective assets unless the Securities are equally and ratably
secured by the Liens covering such assets, except for (i) Liens on assets of the
Company securing Senior Indebtedness and Liens on assets of a Subsidiary
Guarantor which, at the time of incurrence, secure Guarantor Senior
Indebtedness; (ii) existing and future Liens securing Indebtedness and other
obligations of the Company and its Subsidiaries under the Senior Credit
Facilities or any refinancing or replacement thereof in whole or in part
permitted under this Indenture, (iii) Permitted Liens, (iv) Liens securing
Acquired Indebtedness, provided that such Liens (x) are not incurred in
connection with, or in contemplation of, the acquisition of the property or
assets so acquired and (y) do not extend to or cover any property or assets of
the Company or any Subsidiary other than the property or assets so acquired, (v)
Liens to secure Capitalized Lease Obligations and certain other Indebtedness
that is otherwise permitted under this Indenture, provided that (A) any such
Lien is created solely for the purpose of securing such other Indebtedness
representing, or incurred to finance, refinance or refund, the cost (including
sales and excise taxes, installation and delivery charges and other direct costs
of, and other direct expenses paid or charged in connection with, the purchase
(whether through stock or asset purchase, merger or otherwise) or construction
or improvement of the property subject thereto (whether real or personal,
including fixtures and other equipment)), (B) the principal amount of the
Indebtedness secured by such Lien does not exceed 100% of such costs and (C)
such Lien does not extend to or cover any other property other than such item of
property and any improvements on such item, (vi) Liens existing on the Issue
Date, (vii) Liens in favor of the Trustee under this Indenture and any
substantially equivalent Lien granted to any trustee or similar institution
under any indenture for Indebtedness permitted by the terms of this Indenture,
and (viii) any replacement, extension or renewal, in whole or in part, of any
Lien described in the foregoing clauses including in connection with any
refinancing of the Indebtedness, in whole or in part, secured by any such Lien,
provided that to the extent any such clause limits the amount secured or the
assets subject to such Liens, no extension or renewal shall increase the amount
or the assets subject to such Liens, except to the extent that the Liens
associated with such additional assets are otherwise permitted hereunder.
<PAGE> 72
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SECTION 5.15. Limitation on Change of Control.

(a) Upon the occurrence of a Change of Control, each Holder shall have
the right to require the Company to repurchase such Holder's Securities pursuant
to the offer described in paragraph (b), below (the "Change of Control Offer"),
at a purchase price equal to 101% of the principal amount thereof plus accrued
interest to the date of repurchase. Prior to the mailing of the notice of a
Change of Control Offer provided for in paragraph (b) below, within 30 days
following any Change of Control the Company shall either (a) repay in full and
terminate all commitments under Indebtedness under the Senior Credit Facilities
to the extent the terms thereof require repayment upon a Change of Control (or
offer to repay in full and terminate all commitments under all such Indebtedness
under the Senior Credit Facilities and repay the Indebtedness owed to each
lender which has accepted such offer), or (b) obtain the requisite consent under
the Senior Credit Facilities, the terms of which require repayment upon a Change
of Control, to permit the repurchase of the Securities as provided for in this
Section 5.15. The Company shall first comply with the covenant in the
immediately preceding sentence before it shall be required to repurchase
Securities pursuant to this Section 5.15.

(b) Within 30 days following the date upon which the Change of Control
occurred (the "Change of Control Date"), the Company shall send, by first class
mail, a notice to each Holder of Securities, with a copy to the Trustee, which
notice shall govern the terms of the Change of Control Offer. The notice to the
Holders shall contain all instructions and materials necessary to enable such
Holders to tender Securities pursuant to the Change of Control Offer. The
Company shall give notice of an event giving rise to a Change of Control on the
same date and in the same manner to all Holders of Securities. Such notice shall
state:

(1) that the Change of Control Offer is being made pursuant to
this Section 5.15 and that all Securities tendered will be accepted for
payment;

(2) the purchase price (including the amount of accrued
interest) and the purchase date (which shall be no earlier than 30 days
nor later than 40 days from the date such notice is mailed, other than
as may be required by law) (the "Change of Control Payment Date");

(3) that any Security not tendered will continue to accrue
interest if interest is then accruing;
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(4) that, unless (i) the Company defaults in making payment
therefor or (ii) such payment is prohibited pursuant to Article Four,
any Security accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest after the Change of Control
Payment Date;

(5) that Holders electing to have a Security purchased
pursuant to a Change of Control Offer will be required to surrender the
Security, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Security completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the
Business Day prior to the Change of Control Payment Date;

(6) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than two Business Days prior to
the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Securities the Holder delivered for purchase
and a statement that such Holder is withdrawing his election to have
such Security purchased;

(7) that Holders whose Securities are purchased only in part
will be issued new Securities equal in principal amount to the
unpurchased portions of the Securities surrendered; provided that each
Security purchased and each Security issued shall be in an original
principal amount of $1,000 or integral multiples thereof;

(8) that each Change of Contol Offer is required to remain
open for at least 20 business days or such longer period as may be
required by law; and

(9) the circumstances and relevant facts regarding such Change
of Control.

On or before the Change of Control Payment Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the purchase price of all Securities so tendered and (iii)
deliver to the Trustee Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to the Holders of Securities so
accepted payment in an amount equal to the purchase price (and the Trustee shall
promptly authenticate and mail to such Holders new Securities equal in
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principal amount to any unpurchased portion of the Securities surrendered)
unless such payment is prohibited pursuant to Article Four or otherwise. The
Company will publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Payment Date. For purposes of
this Section 5.15, the Trustee shall act as the Paying Agent.

The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Securities pursuant to a Change of Control Offer. To the extent
the provisions of any securities laws or regulations conflict with the
provisions under this Section 5.15, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this Section 5.15 by virtue thereof.

SECTION 5.16. Limitation on Asset Sales.

The Company shall not, and shall not cause or permit any of its
Subsidiaries to, make any Asset Sale, unless (a) the Company or the applicable
Subsidiary receives consideration at the time of such Asset Sale at least equal
to the fair market value of the assets sold and (b) upon consummation of an
Asset Sale, the Company will within 365 days of the receipt of the proceeds
therefrom, either: (i) apply or cause its Subsidiary to apply the Net Cash
Proceeds of any Asset Sale to (1) a Related Business Investment, (2) an
investment in properties and assets that replace the properties and assets that
are the subject of such Asset Sale or (3) an investment in properties and assets
that will be used in the business of the Company and its Subsidiaries existing
on the Issue Date or in a business reasonably related thereto; (ii) in the case
of a sale of a store or stores, deem such Net Cash Proceeds to have been applied
to the extent of any capital expenditures made to acquire or construct a
replacement store in the general vicinity of the store sold within 365 days
preceding the date of the Asset Sale; (iii) apply or cause to be applied such
Net Cash Proceeds to the permanent repayment of Pari Passu Indebtedness or
Senior Indebtedness; provided, however, that the repayment of any revolving loan
(under the Senior Credit Facilities or otherwise) shall result in a permanent
reduction in the commitment thereunder; (iv) use such Net Cash Proceeds to
secure Letter of Credit Obligations to the extent related letters of credit have
not been drawn upon or returned undrawn; or (v) after such time as the
accumulated Net Cash Proceeds equals or exceeds $10 million, apply or cause to
be applied such Net Cash Proceeds to the purchase of Securities tendered to the
Company for purchase at a price equal to 100% of the principal amount thereof
plus accrued interest thereon
<PAGE> 75
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to the date of purchase pursuant to an offer to purchase made by the Company as
set forth below (a "Net Proceeds Offer"); provided, however, that the Company
shall have the right to exclude from the foregoing provisions Asset Sales
subsequent to the Issue Date, the proceeds of which are derived from (x) the
sale and substantially concurrent lease-back of a supermarket and/or related
assets or equipment which is acquired or constructed by the Company or a
Subsidiary subsequent to the Issue Date; provided, however, that any such sale
and substantially concurrent lease-back occurs within 270 days following such
acquisition or the completion of such construction, as the case may be or (y)
from the sale or sale and substantially concurrent lease-back of certain
specified property as provided on Schedule I attached hereto. Pending the
utilization of any Net Cash Proceeds in the manner (and within the time period)
described above, the Company may use any such Net Cash Proceeds to repay
revolving loans under the Senior Credit Facilities without a permanent reduction
of the commitment thereunder.

Notice of a Net Proceeds Offer pursuant to this Section 5.16 will be
mailed to record Holders of Securities as shown on the register of Holders not
less than 325 days nor more than 365 days after the relevant Asset Sale, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Securities pursuant to the Net
Proceeds Offer and shall state the following terms:

(1) that the Net Proceeds Offer is being made pursuant to
Section 5.16 and that all Securities tendered will be accepted for
payment, provided, however, that if the aggregate principal amount of
Securities tendered in a Net Proceeds Offer plus accrued interest at
the expiration of such offer exceeds the aggregate amount of the Net
Proceeds Offer, the Company shall select the Securities to be purchased
on a pro rata basis (with such adjustments as may be deemed appropriate
by the Company so that only Securities in denominations of $1,000 or
multiples thereof shall be purchased);

(3) that any Security not tendered will continue to accrue
interest if interest is then accruing;

(4) that, unless (i) the Company defaults in making payment
therefor or (ii) such payment is prohibited pursuant
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to Article Four or otherwise, any Security accepted for payment
pursuant to the Net Proceeds Offer shall cease to accrue interest after
the Proceeds Purchase Date;

(5) that Holders electing to have a Security purchased
pursuant to a Net Proceeds Offer will be required to surrender
the Security, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Security completed, to
the Paying Agent at the address specified in the notice prior
to the close of business on the Business Day prior to the
Proceeds Purchase Date;

(6) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than two Business Days prior to
the Proceeds Purchase Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of
the Securities the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have such Security
purchased;

(7) that Holders whose Securities were purchased only in part
will be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered; provided that each
Security purchased and each new Security issued shall be in an original
principal amount of $1,000 or integral multiples thereof; and

(8) that each Net Proceeds Offer is required to remain open
for at least 20 Business Days or such longer period as may be required
by law.

On or before the Proceeds Purchase Date, the Company shall (i) accept
for payment Securities or portions thereof tendered pursuant to the Net Proceeds
Offer which are to be purchased in accordance with item (b)(1) above, (ii)
deposit with the Paying Agent U.S. Legal Tender sufficient to pay the purchase
price of all Securities to be purchased and (iii) deliver to the Trustee
Securities so accepted together with an Officers' Certificate stating the
Securities or portions thereof being purchased by the Company. The Paying Agent
shall promptly mail to the Holders of Securities so accepted payment in an
amount equal to the purchase price (and the Trustee shall promptly authenticate
and mail or deliver to such Holders a new Security equal in principal amount to
any unpurchased portion of the Security surrendered) unless such payment is
prohibited pursuant to Article Four hereof or otherwise. The Company will
publicly announce the results of the Net Proceeds Offer on or as soon as
practicable after the
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Proceeds Purchase Date. For purposes of this Section 5.16, the Trustee shall act
as the Paying Agent.

Any amounts remaining after the purchase of Securities pursuant to a
Net Proceeds Offer shall be returned by the Trustee to the Company.

The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Securities pursuant to a Net Proceeds Offer. To the extent the provisions of
any securities laws or regulations conflict with the provisions under this
Section 5.16, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 5.16 by virtue thereof.

SECTION 5.17. Guarantees of Certain Indebtedness.

The Company shall not cause or permit any of its Subsidiaries to (a)
incur, guarantee or secure through the granting of Liens the payment of any
Indebtedness under the Term Loans or refinancings thereof or (b) pledge any
intercompany notes representing obligations of any of its Subsidiaries, to
secure the payment of any Indebtedness under the Term Loans or refinancings
thereof, in each case unless such Subsidiary, the Company and the Trustee
execute and deliver a supplemental indenture evidencing such Subsidiary's
Guarantee.

SECTION 5.18. Limitation on Preferred Stock of Subsidiaries.

The Company shall not permit any of its Subsidiaries to issue Preferred
Stock (other than to the Company or to a wholly owned Subsidiary) or permit any
person (other than the Company or a wholly owned Subsidiary) to own any
Preferred Stock of any Subsidiary.

SECTION 5.19. Limitation on Other Senior Subordinated
Indebtedness.

Neither the Company nor any Subsidiary Guarantor shall, directly or
indirectly, incur any Indebtedness (including Acquired Indebtedness) that is
subordinate in right of payment to any Indebtedness of the Company or such
Subsidiary Guarantor, as the case may be, unless such Indebtedness is either (a)
pari passu in right of payment with the Securities or the Guarantee of such
Subsidiary Guarantor, as the case may be, or (b) subordinate in right of payment
to the Securities or the Guarantee of such
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Subsidiary Guarantor, as the case may be, in the same manner and at least to the
same extent as the Securities are subordinate to Senior Indebtedness or as such
Guarantee is subordinated to Senior Guarantor Indebtedness of such Subsidiary
Guarantor, as the case may be.

ARTICLE SIX

SUCCESSOR CORPORATION

SECTION 6.01. Limitations on Mergers and Certain Other
Transactions.

(a) The Company shall not in a single transaction or through a series
of related transactions, (i) consolidate with or merge with or into any other
person, or transfer (by lease, assignment, sale or otherwise) all or
substantially all of its properties and assets as an entirety or substantially
as an entirety to another person or group of affiliated persons or (ii) adopt a
Plan of Liquidation, unless, in either case:

(1) either the Company shall be the continuing person, or the
person (if other than the Company) formed by such consolidation or into
which the Company is merged or to which all or substantially all of the
properties and assets of the Company as an entirety or substantially as
an entirety are transferred (or, in the case of a Plan of Liquidation,
any person to which assets are transferred) (the Company or such other
person being hereinafter referred to as the "Surviving Person") shall
be a corporation organized and validly existing under the laws of the
United States, any State thereof or the District of Columbia, and shall
expressly assume, by an indenture supplement, all the obligations of
the Company under the Securities and this Indenture;

(2) immediately after and giving effect to such transaction
and the assumption contemplated by clause (1) above and the incurrence
or anticipated incurrence of any Indebtedness to be incurred in
connection therewith, (A) the Surviving Person shall have a
Consolidated Net Worth equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction and (B) the
Surviving Person could incur at least $1 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to Section 5.12;
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(3) immediately before and immediately after and giving effect
to such transaction and the assumption of the obligations as set forth
in clause (1) above and the incurrence or anticipated incurrence of any
Indebtedness to be incurred in connection therewith, no Default or
Event of Default shall have occurred and be continuing; and

(4) each Subsidiary Guarantor, unless it is the other party to
the transaction, shall have by supplemental indenture confirmed that
its Guarantee of the obligations of the Company under the Securities
and this Indenture shall apply, without alteration or amendment as such
Guarantee applies on the date it was granted under this Indenture to
the obligations of the Company under this Indenture and the Securities
to the obligations of the Company or such Person as the case may be,
under this Indenture and the Securities, after consummation of such
transaction.

(b) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties and assets of one or
more direct or indirect Subsidiaries, the Capital Stock of which constitutes all
or substantially all of the properties and assets of the Company shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.

SECTION 6.02. Successor Corporation Substituted.

Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company or any adoption of a Plan of
Liquidation by the Company in accordance with Section 6.01, the successor person
formed by such consolidation or into which the Company is merged or to which
such transfer is made (or, in the case of a Plan of Liquidation, to which assets
are transferred) shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under this Indenture with the same effect
as if such successor person had been named as the Company herein; provided,
however, that solely for purposes of computing amounts described in subclause
(c) of the first paragraph of Section 5.03, any such successor person shall only
be deemed to have succeeded to and be substituted for the Company with respect
to periods subsequent to the effective time of such merger, consolidation or
transfer of assets.
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ARTICLE SEVEN

DEFAULT AND REMEDIES

SECTION 7.01. Events of Default.

An "Event of Default" occurs if:

(i) the Company defaults in the payment of interest on any
Securities when the same becomes due and payable and the Default
continues for a period of 30 days, whether or not such payment shall be
prohibited by the provisions of Article Four hereof;

(ii) the Company defaults in the payment of the principal of,
or premium, if any, on the Securities when due whether at maturity,
upon acceleration, redemption, required repurchase or otherwise,
whether or not such payment shall be prohibited by the provisions of
Article Four hereof;

(iii) the Company fails to comply with any of its agreements
contained in the Securities or this Indenture (other than a default
specified in clause (i) or (ii) above), if such failure continues for
the period and after the notice specified below;

(iv) there shall be a default under any Indebtedness of the
Company or any of its Subsidiaries, whether such Indebtedness now
exists or shall hereafter be created, if both (A) such default either
(1) results from the failure to pay any such Indebtedness at its stated
final maturity or (2) relates to an obligation other than the
obligation to pay such Indebtedness at its stated final maturity and
results in the holder or holders of such Indebtedness causing such
Indebtedness to become due prior to its stated final maturity and (B)
the principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness in default for failure to pay
principal at stated final maturity or the maturity of which has been so
accelerated, aggregates $20 million or more at any one time
outstanding;

(v) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $20 million, either individually or in
the aggregate, shall be entered against the Company or any Significant
Subsidiary or any of their respective properties and shall not be
discharged
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for a period of 60 days after such judgment becomes final and
nonappealable and during which a stay of enforcement of such judgment,
order or decree shall not be in effect;

(vi) either the Company or any Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law: (a) commences
a voluntary case or proceeding; (b) consents to the entry of a
Bankruptcy Order for relief against it in an involuntary case or
proceeding or the commencement of any case or proceeding against it;
(c) consents to the appointment of a custodian of it or for
substantially all of its property; or (d) makes a general assignment
for the benefit of its creditors;

(vii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (a) is for relief against the
Company or any Significant Subsidiary, in an involuntary case or
proceeding; (b) appoints a custodian of the Company or any Significant
Subsidiary, or for all or any substantial part of their respective
properties; or (c) orders the liquidation of the Company or any
Significant Subsidiary and in each case the order or decree remains
unstayed and in effect for 60 days;

(viii) the lenders under the Senior Credit Facilities shall
commence judicial proceedings to foreclose upon any material portion of
the assets of the Company and its Subsidiaries or shall have exercised
any right under applicable law or applicable security documents to take
ownership of any such assets in lieu of foreclosure; or

(ix) any of the Guarantees shall be declared or adjudged
invalid in a final judgment or order issued by any court or
governmental authority.

In the event of a declaration of acceleration because of an
Event of Default set forth in clause (iv) above has occurred and is continuing,
such declaration of acceleration shall be automatically rescinded and annulled
if either (i) the holders of the Indebtedness which is the subject of such Event
of Default have waived such failure to pay at maturity or have rescinded the
acceleration in respect of such Indebtedness within 90 days of such maturity or
declaration of acceleration, as the case may be, and no other Event of Default
has occurred during such 90-day period which has not been cured or waived, or
(ii) such Indebtedness shall have been discharged or the maturity thereof shall
have been extended such that it is not then due and payable, or the underlying
default
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has been cured, within 90 days of such maturity or declaration of acceleration,
as the case may be.

A Default under clause (iii) above (other than in the case of
any Default under Section 5.03, 5.15, 5.16 or 6.01, which Defaults shall be
Events of Default with the notice specified in this paragraph but without the
passage of time specified in this paragraph) is not an Event of Default until
the Trustee notifies the Company, or the Holders of at least 25% in principal
amount of the outstanding Securities notify the Company and the Trustee of the
Default, and the Company does not cure the Default within 30 days after receipt
of the notice. The notice must specify the Default, demand that it be remedied
and state that the notice is a "Notice of Default." Such notice shall be given
by the Trustee if so requested by the Holders of at least 25% in principal
amount of the Securities then outstanding. When a Default is cured, it ceases.

SECTION 7.02. Acceleration.

(a) If an Event of Default (other than an Event of Default
specified in Section 7.01(vi) or (vii) with respect to the Company or a
Subsidiary Guarantor) occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Securities may, and the
Trustee upon the request of the Holders of not less than 25% in aggregate
principal amount of the then outstanding Securities shall, declare due and
payable all unpaid principal and interest accrued and unpaid on the then
outstanding Securities by written notice to the Company and the Trustee
specifying the respective Event of Default and that it is a "notice of
acceleration" (the "Acceleration Notice"), and the same (i) shall become
immediately due and payable or (ii) if there are any amounts outstanding under
the Senior Credit Facilities, shall become immediately due and payable upon the
first to occur of an acceleration under the Senior Credit Facilities, or five
business days after receipt by the Company and the Credit Agent of such
Acceleration Notice. If an Event of Default specified in Section 7.01(vi) or
(vii) occurs with respect to the Company or a Subsidiary Guarantor that is a
Significant Subsidiary, all unpaid principal of and accrued interest on all then
outstanding Securities shall be immediately due and payable without any
declaration or other act on the part of the Trustee or any of the Holders. Upon
payment of such principal amount, interest, and premium, if any, all of the
Company's obligations under the Securities and this Indenture, other than
obligations under Section 8.07, shall terminate. At any time after a declaration
of acceleration with respect to the Securities as described above, the Holders
of a majority in principal amount of the Securities then
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outstanding, by notice to the Trustee, may rescind and cancel such declaration
and its consequences if (i) all existing Events of Default, other than the
non-payment of the principal of or interest on the Securities which has become
due solely by such acceleration, have been cured or waived, (ii) to the extent
the payment of such interest is lawful, interest on overdue installments of
interest and overdue principal, which has become due otherwise than by such
declaration of acceleration, has been paid, (iii) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction, (iv)
the Company has paid or deposited with the Trustee a sum sufficient to pay all
sums paid or advanced by the Trustee under this Indenture and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel and (v) in the event of the cure or waiver of an Event of Default of
the type described in clauses (vi), (vii), (viii), or (ix) of Section 7.01
above, the Trustee shall have received an Officers' Certificate and an Opinion
of Counsel that such Event of Default has been cured or waived.

(b) In the event of a declaration of acceleration under this
Indenture because an Event of Default set forth in Section 7.01(iv) has occurred
and is continuing, such declaration of acceleration shall be automatically
rescinded and annulled if either (i) the holders of the Indebtedness which is
the subject of such Event of Default have waived such failure to pay at maturity
or have rescinded the acceleration in respect of such Indebtedness within 90
days of such maturity or declaration of acceleration, as the case may be, and no
other Event of Default has occurred during such 90-day period which has not been
cured or waived, or (ii) such Indebtedness shall have been discharged or the
maturity thereof shall have been extended such that it is not then due and
payable, or the underlying default has been cured, within 90 days of such
maturity or declaration of acceleration, as the case may be.

SECTION 7.03. Other Remedies.

If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.

The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy is
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exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.

SECTION 7.04. Waiver of Past Defaults.

Subject to Sections 7.07 and 10.02, the Holders of a majority
in principal amount of the outstanding Securities by notice to the Trustee may
waive an existing Default or Event of Default and its consequences, except a
Default in the payment of principal of or interest on any Security as specified
in clauses (i) and (ii) of Section 7.01. When a Default or Event of Default is
waived, it is cured and ceases.

SECTION 7.05. Control by Majority.

Subject to Section 2.09, the Holders of a majority in
principal amount of the outstanding Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it, including, without limitation,
any remedies provided for in Section 7.03. Subject to Section 8.01, however, the
Trustee may refuse to follow any direction that conflicts with any law or this
Indenture, that the Trustee determines may be unduly prejudicial to the rights
of another Securityholder, or that may involve the Trustee in personal
liability; provided that the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.

SECTION 7.06. Limitation on Suits.

A Securityholder may not pursue any remedy with respect to
this Indenture or the Securities unless:

(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;

(2) the Holder or Holders of at least 25% in principal
amount of the outstanding Securities make a written request to
the Trustee to pursue the remedy;

(3) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense to
be incurred in compliance with such request;

(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and
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(5) during such 60-day period the Holder or Holders of a
majority in principal amount of the outstanding Securities do not give
the Trustee a direction which, in the opinion of the Trustee, is
inconsistent with the request.

A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over such
other Securityholder.

SECTION 7.07. Rights of Holders to Receive Payment.

Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of and interest on a
Security, on or after the respective due dates expressed in such Security, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Holder.

SECTION 7.08. Collection Suit by Trustee.

If an Event of Default in payment of principal or interest
specified in clause (i) or (ii) of Section 7.01 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or any other obligor on the Securities for the whole amount
of principal and accrued interest remaining unpaid, together with interest on
overdue principal and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate per annum
borne by the Securities and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.

SECTION 7.09. Trustee May File Proofs of Claim.

The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relating to the Company or
any other obligor upon the Securities, any of their respective creditors or any
of their respective property and shall be entitled and empowered to collect and
receive any monies or other property payable or deliverable on any such claims
and to distribute the same, and any Custodian in any such judicial proceedings
is hereby authorized by each Securityholder to make such payments to the Trustee
and, in the event that the Trustee shall consent to the
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making of such payments directly to the Securityholders, to pay to the Trustee
any amount due to it for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agent and counsel, and any other amounts due
the Trustee under Section 8.07. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any Security-holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding.

SECTION 7.10. Priorities.

If the Trustee collects any money pursuant to this Article
Seven, it shall pay out the money in the following order:

First: to the Trustee for amounts due under Section 8.07;

Second: subject to Article Four and Article Twelve, to
Holders for interest accrued on the Securities, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Securities for interest;

Third: subject to Article Four and Article Twelve, to
Holders for principal amounts due and unpaid on the Securities,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Securities for principal; and

Fourth: subject to Article Four and Article Twelve, to the
Company or the Subsidiary Guarantors, as their respective interests may
appear.

The Trustee, upon prior notice to the Company, may fix a
record date and payment date for any payment to Securityholders pursuant to this
Section 7.10.

SECTION 7.11. Rights and Remedies Cumulative.

No right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
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concurrent assertion or employment of any other appropriate right or remedy.

SECTION 7.12. Delay or Omission Not Waiver.

No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article Seven or by law to the Trustee or to the Holders may be exercised from
time to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.

SECTION 7.13. Undertaking for Costs.

In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 7.13 does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 7.07, or a suit by a Holder or Holders of more than
10% in principal amount of the outstanding Securities.

ARTICLE EIGHT

TRUSTEE

The Trustee hereby accepts the trust imposed upon it by this
Indenture and covenants and agrees to perform the same, as herein expressed.

SECTION 8.01. Duties of Trustee.

(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in its exercise
thereof as a prudent person would exercise or use under the circumstances in the
conduct of his own affairs.
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(b) Except during the continuance of a Default or an Event
of Default:

(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no covenants or
obligations shall be implied in this Indenture that are adverse to the
Trustee.

(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture.

(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:

(1) This paragraph does not limit the effect of paragraph (b)
of this Section 8.01.

(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.

(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 7.05.

(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.

(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section
8.01.

(f) The Trustee shall not be liable for interest on any
assets received by it except as the Trustee may agree with the
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Company. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.

SECTION 8.02. Rights of Trustee.

Subject to Section 8.01:

(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.

(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may require an Officers' Certificate or an
Opinion of Counsel, which shall conform to Sections 13.04 and 13.05.
The Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on such certificate or opinion.

(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed with due care.

(d) The Trustee shall not be liable for any action that it
takes or omits to take in good faith which it believes to be authorized
or within its rights or powers.

(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, notice, request, direction, consent,
order, bond, debenture, or other paper or document, but the Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit.

(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Holders pursuant to the provisions of
this Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby.

SECTION 8.03. Individual Rights of Trustee.

The Trustee in its individual or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with the Company, its
Subsidiaries, or their respective Affiliates
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with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights. However, the Trustee must comply with Sections 8.10 and
8.11.

SECTION 8.04. Trustee's Disclaimer.

The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Securities, it shall not be accountable for
the Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement in the Securities other than the Trustee's
certificate of authentication.

SECTION 8.05. Notice of Default.

If a Default or an Event of Default occurs and is continuing
and if it is known to the Trustee, the Trustee shall mail to each Holder of
Securities notice of the Default or Event of Default within 90 days after such
Default or Event of Default occurs; provided, however, that, except in the case
of a Default or Event of Default in the payment of the principal of or interest
on any Security, including the failure to make payment on a Change of Control
Payment Date pursuant to a Change of Control Offer or payment when due pursuant
to a Net Proceeds Offer the Trustee may withhold such notice if it in good faith
determines that withholding such notice is in the interest of the Holders.

SECTION 8.06. Reports by Trustee to Holders.

Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, the Trustee shall, to the extent that any
of the events described in TIA Section 313(a) occurred within the previous
twelve months, but not otherwise, mail to each Securityholder a brief report
dated as of such date that complies with TIA Section 313(a). The Trustee also
shall comply with TIA Sections 313(b) and 313(c).

A copy of each report at the time of its mailing to
Securityholders shall be mailed to the Company and filed with the Commission and
each stock exchange, if any, on which the Securities are listed.

The Company shall notify the Trustee if the Securities become
listed on any stock exchange.
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SECTION 8.07. Compensation and Indemnity.

The Company shall pay to the Trustee from time to time
reasonable compensation for its services. The Trustee's compensation shall not
be limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances incurred or made by it. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.

The Company shall indemnify the Trustee for, and hold it
harmless against, any loss or liability incurred by it except for such actions
to the extent caused by any negligence or bad faith on its part, arising out of
or in connection with the administration of this trust and its rights or duties
hereunder. The Trustee shall notify the Company promptly of any claim asserted
against the Trustee for which it may seek indemnity. The Company shall defend
the claim and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and the Company shall pay the reasonable fees and expenses of
such counsel; provided that the Company will not be required to pay such fees
and expenses if it assumes the Trustee's defense and there is no conflict of
interest between the Company and the Trustee in connection with such defense as
reasonably determined by the Trustee. The Company need not pay for any
settlement made without its written consent. The Company need not reimburse any
expense or indemnify against any loss or liability to the extent incurred by the
Trustee through its negligence, bad faith or willful misconduct.

To secure the Company's payment obligations in this Section
8.07, the Trustee shall have a lien prior to the Securities on all assets held
or collected by the Trustee, in its capacity as Trustee, except assets held in
trust to pay principal of or interest on particular Securities.

When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 7.01(vi) or (vii) occurs, the expenses and
the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.

SECTION 8.08. Replacement of Trustee.

The Trustee may resign by so notifying the Company. The
Holders of a majority in principal amount of the outstanding Securities may
remove the Trustee and appoint a successor trustee
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with the Company's consent, by so notifying the Company and the Trustee. The
Company may remove the Trustee if:

(1) the Trustee fails to comply with Section 8.10;

(2) the Trustee is adjudged a bankrupt or an insolvent;

(3) a receiver or other public officer takes charge of the
Trustee or its property; or

(4) the Trustee becomes incapable of acting.

If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall notify each Holder of
such event and shall promptly appoint a successor Trustee. Within one year after
the successor Trustee takes office, the Holders of a majority in principal
amount of the Securities may appoint a successor Trustee to replace the
successor Trustee appointed by the Company.

A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 8.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Securityholder.

If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.

If the Trustee fails to comply with Section 8.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.

Notwithstanding replacement of the Trustee pursuant to this
Section 8.08, the Company's obligations under Section 8.07 shall continue for
the benefit of the retiring Trustee.
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SECTION 8.09. Successor Trustee by Merger, Etc.

If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.

SECTION 8.10. Eligibility; Disqualification.

This Indenture shall always have a Trustee who satisfies the
requirement of TIA Sections 310(a)(1) and 310(a)(5). The Trustee shall have a
combined capital and surplus of at least $100,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities, or certificates of interest or participation in other securities, of
the Company are outstanding, if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.

SECTION 8.11. Preferential Collection of Claims Against
Company.

The Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated.

ARTICLE NINE

SATISFACTION AND DISCHARGE OF INDENTURE

SECTION 9.01. Termination of the Company's
Obligations.

The Company may terminate its obligations under the Securities
and this Indenture, and the obligations of any Subsidiary Guarantor shall
terminate, except those obligations referred to in the penultimate paragraph of
this Section 9.01, if all Securities previously authenticated and delivered
(other than destroyed, lost or stolen Securities which have been replaced or
paid or Securities for whose payment money has theretofore been deposited with
the Trustee or the Paying Agent in trust or segregated and held in trust by the
Company and thereafter repaid
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to the Company, as provided in Section 9.04) have been delivered to the Trustee
for cancellation and the Company has paid all sums payable by it hereunder, or
if:

(1) either (i) pursuant to Article Three, the Company shall
have given notice to the Trustee and mailed a notice of redemption to
each Holder of the redemption of all of the Securities or (ii) all
Securities have otherwise become due and payable hereunder;

(2) the Company shall have irrevocably deposited or caused to
be deposited with the Trustee or a trustee satisfactory to the Trustee,
under the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the
benefit of the Holders for that purpose, money in such amount as is
sufficient without consideration of reinvestment of such interest, to
pay principal of, premium, if any, and interest on the outstanding
Securities to maturity or redemption; provided that the Trustee shall
have been irrevocably instructed to apply such money to the payment of
said principal, premium, if any, and interest with respect to the
Securities; and provided, further, that from and after the time of
deposit, the money deposited shall not be subject to the rights of
holders of Senior Indebtedness pursuant to the provisions of Article
Four and Article Twelve;

(3) no Default or Event of Default with respect to this
Indenture or the Securities shall have occurred and be continuing on
the date of such deposit or shall occur as a result of such deposit and
such deposit will not result in a breach or violation of, or constitute
a default under, any other instrument to which the Company is a party
or by which it is bound;

(4) the Company shall have paid all other sums payable by it
hereunder; and

(5) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent providing for the termination of the Company's and
any Subsidiary Guarantor's obligation under the Securities and this
Indenture have been complied with. Such Opinion of Counsel shall also
state that such satisfaction and discharge does not result in a default
under the Senior Credit Facilities (if then in effect) or any other
agreement or instrument then known to such counsel that binds or
affects the Company.
<PAGE> 95
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Notwithstanding the foregoing paragraph, the Company's
obligations in Sections 2.05, 2.06, 2.07, 2.08, 5.01, 5.02 and 8.07 and any
Subsidiary Guarantor's obligations in respect thereof shall survive until the
Securities are no longer outstanding pursuant to the last paragraph of Section
2.08. After the Securities are no longer outstanding, the Company's obligations
in Sections 8.07, 9.04 and 9.05 and any Subsidiary Guarantor's obligations in
respect thereof shall survive.

After such delivery or irrevocable deposit and compliance with
the other requirements of this Section 9.01, the Trustee upon request shall
acknowledge in writing the discharge of the Company's and any Subsidiary
Guarantor's obligations under the Securities and this Indenture except for those
surviving obligations specified above.

SECTION 9.02. Legal Defeasance and Covenant
Defeasance.

(a) The Company may, at its option by Board Resolution of the
Board of Directors of the Company, at any time, with respect to the Securities,
elect to have either paragraph (b) or paragraph (c) below be applied to the
outstanding Securities upon compliance with the conditions set forth in
paragraph (d).

(b) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (b), the Company and any Subsidiary
Guarantor shall be deemed to have been released and discharged from its
obligations with respect to the outstanding Securities on the date the
conditions set forth below are satisfied (hereinafter, "legal defeasance"). For
this purpose, such legal defeasance means that the Company shall be deemed to
have paid and discharged the entire Indebtedness represented by the outstanding
Securities, which shall thereafter be deemed to be "outstanding" only for the
purposes of paragraph (e) below and the other Sections of and matters under this
Indenture referred to in (i) and (ii) below, and to have satisfied all its other
obligations under such Securities and this Indenture insofar as such Securities
are concerned (and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same), and Holders of the Securities and
the Guarantees and any amounts deposited under paragraph (d) below shall cease
to be subject to any obligations to, or the rights of, any holder of Senior
Indebtedness or Guarantor Senior Indebtedness under Article Four, Article Twelve
or otherwise, except for the following which shall survive until otherwise
terminated or discharged hereunder: (i) the rights of Holders of outstanding
Securities to receive solely from the trust fund described in paragraph (d)
below and as more fully set forth
<PAGE> 96
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in such paragraph, payments in respect of the principal of, premium, if any, and
interest on such Securities when such payments are due, (ii) the Company's
obligations with respect to such Securities under Sections 2.06, 2.07 and 5.02,
and, with respect to the Trustee, under Section 8.07 and any Subsidiary
Guarantor's obligations in respect thereof, (iii) the rights, powers, trusts,
duties and immunities of the Trustee hereunder and the Company's obligations in
connection herewith, and (iv) this Section 9.02 and Section 9.05. Subject to
compliance with this Section 9.02, the Company may exercise its option under
this paragraph (b) notwithstanding the prior exercise of its option under
paragraph (c) below with respect to the Securities.

(c) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (c), the Company shall be released and
discharged from its obligations under any covenant contained in Article Four and
Article Six and in Sections 5.03, 5.05 through 5.09 and 5.11 through 5.19 with
respect to the outstanding Securities on and after the date the conditions set
forth below are satisfied (hereinafter, "covenant defeasance"), and the
Securities shall thereafter be deemed to be not "outstanding" for the purpose of
any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder and Holders
of the Securities and the Guarantees and any amounts deposited under paragraph
(d) below shall cease to be subject to any obligations to, or the rights of, any
holder of Senior Indebtedness or Guarantor Senior Indebtedness under Article
Four, Article Twelve or otherwise. For this purpose, such covenant defeasance
means that, with respect to the outstanding Securities, the Company and any
Subsidiary Guarantor may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 7.01(iii),
but, except as specified above, the remainder of this Indenture and such
Securities shall be unaffected thereby.

(d) The following shall be the conditions to application of
either paragraph (b) or paragraph (c) above to the outstanding Securities:

(i) the Company shall irrevocably have deposited or caused
to be deposited with the Trustee (or another trustee satisfying the
requirements of Section 8.10 who shall agree to
<PAGE> 97
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comply with the provisions of this Section 9.02 applicable to it) as
trust funds in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such Securities, (x) cash in U.S. dollars or
(y) direct non-callable obligations of, or non-callable obligations
guaranteed by, the United States of America for the payment of which
guarantee or obligation the full faith and credit of the United States
is pledged ("U.S. Government Obligations") maturing as to principal,
premium, if any, and interest in such amounts of money and at such
times as are sufficient without consideration of any reinvestment of
such interest, to pay principal of and interest on the outstanding
Securities not later than one day before the due date of any payment,
or (z) a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge principal
of, premium, if any, and interest on the outstanding Securities on the
Maturity Date or otherwise in accordance with the terms of this
Indenture and of such Securities; provided, however, that the Trustee
(or other qualifying trustee) shall have received an irrevocable
written order from the Company instructing the Trustee (or other
qualifying trustee) to apply such money or the proceeds of such U.S.
Government Obligations to said payments with respect to the Securities;

(ii) no Default or Event of Default or event which with
notice or lapse of time or both would become a Default or an Event of
Default with respect to the Securities shall have occurred and be
continuing on the date of such deposit or, insofar as Section 7.01(vi)
or (vii) is concerned, at any time during the period ending on the 91st
day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such
period);

(iii) such legal defeasance or covenant defeasance shall not
cause the Trustee to have a conflicting interest with respect to any
Securities of the Company or any Subsidiary Guarantor;

(iv) such legal defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a Default or Event of
Default under, this Indenture or any other material agreement or
instrument to which the Company, any Subsidiary or any Subsidiary
Guarantor is a party or by which
<PAGE> 98
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it is bound (and in that connection, the Trustee shall have received a
certificate from the Credit Agent to that effect with respect to such
Senior Credit Facilities if then in effect);

(v) in the case of an election under paragraph (b) above,
the Company shall have delivered to the Trustee an Opinion of Counsel,
such counsel being in the United States, stating that (x) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling or (y) since the Issue Date, there has been a change
in the applicable Federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the Holders of
the outstanding Securities will not recognize income, gain or loss for
Federal income tax purposes as a result of such legal defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such legal
defeasance had not occurred;

(vi) in the case of an election under paragraph (c) above,
the Company shall have delivered to the Trustee an Opinion of Counsel,
such counsel being in the United States, to the effect that the Holders
of the outstanding Securities will not recognize income, gain or loss
for Federal income tax purposes as a result of such covenant defeasance
and will be subject to Federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
covenant defeasance had not occurred;

(vii) in the case of an election under either paragraph (b) or
(c) above, an Opinion of Counsel to the effect that, (x) the trust
funds will not be subject to any rights of any other holders of Senior
Indebtedness or Guarantor Senior Indebtedness, including, without
limitation, those arising under this Indenture, after the 91st day
following the deposit, and (y) after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable Bankruptcy Law;

(viii) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent relating to either the legal defeasance under
paragraph (b) above or the covenant defeasance under paragraph (c)
above, as the case may be, have been complied with; and
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(ix) the Company shall have delivered to the Trustee an
Officer's Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of the Securities
over other creditors of the Company or any Subsidiary Guarantor or with
the intent of defeating, hindering, delaying or defrauding creditors of
the Company, any Subsidiary Guarantor or others.

(e) All money and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this paragraph (e), the "Trustee") pursuant to
paragraph (d) above in respect of the outstanding Securities shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (other than the Company or any Affiliate of the Company) as the
Trustee may determine, to the Holders of such Securities of all sums due and to
become due thereon in respect of principal, premium and interest, but such money
need not be segregated from other funds except to the extent required by law.

The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to paragraph (d) above or the principal, premium,
if any, and interest received in respect thereof other than any such tax, fee or
other charge which by law is for the account of the Holders of the outstanding
Securities.

Anything in this Section 9.02 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon the
request, in writing, by the Company any money or U.S. Government Obligations
held by it as provided in paragraph (d) above which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof which would then be required to be deposited to effect an
equivalent legal defeasance or covenant defeasance.

SECTION 9.03. Application of Trust Money.

The Trustee shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Sections 9.01 and 9.02, and shall
apply the deposited money and the money from U.S. Government Obligations in
accordance with this Indenture to the
<PAGE> 100
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payment of principal of, premium, if any, and interest on the Securities.

SECTION 9.04. Repayment to Company or Subsidiary
Guarantors.

Subject to Sections 8.07, 9.01 and 9.02, the Trustee shall
promptly pay to the Company, or if deposited with the Trustee by any Subsidiary
Guarantor, to such Guarantor, upon receipt by the Trustee of an Officers'
Certificate, any excess money, determined in accordance with Section 9.02, held
by it at any time. The Trustee and the Paying Agent shall pay to the Company or
any Subsidiary Guarantor, as the case may be, upon receipt by the Trustee or the
Paying Agent, as the case may be, of an Officers' Certificate, any money held by
it for the payment of principal, premium, if any, or interest that remains
unclaimed for two years after payment to the Holders is required; provided,
however, that the Trustee and the Paying Agent before being required to make any
payment may, but need not, at the expense of the Company cause to be published
once in a newspaper of general circulation in The City of New York or mail to
each Holder entitled to such money notice that such money remains unclaimed and
that after a date specified therein, which shall be at least 30 days from the
date of such publication or mailing, any unclaimed balance of such money then
remaining will be repaid to the Company. After payment to the Company or any
Subsidiary Guarantor, as the case may be, Security- holders entitled to money
must look solely to the Company for payment as general creditors unless an
applicable abandoned property law designates another person, and all liability
of the Trustee or Paying Agent with respect to such money shall thereupon cease.

SECTION 9.05. Reinstatement.

If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with this Indenture by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then and only then the Company's and each Subsidiary Guarantor's,
if any, obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had been made pursuant to this Indenture until
such time as the Trustee is permitted to apply all such money or U.S. Government
Obligations in accordance with this Indenture; provided, however, that if the
Company or the Subsidiary Guarantors, as the case may be, has made any payment
of principal of, premium, if any, or interest on any Securities because of the
reinstatement of its obligations, the Company or the
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Subsidiary Guarantors, as the case may be, shall be, subrogated to the rights of
the holders of such Securities to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.

ARTICLE TEN

AMENDMENTS, SUPPLEMENTS AND WAIVERS

SECTION 10.01. Without Consent of Holders.

The Company and the Subsidiary Guarantors, when authorized by
a Board Resolution, and the Trustee, together, may amend or supplement this
Indenture or the Securities without notice to or consent of any Securityholder:

(1) to cure any ambiguity, defect or inconsistency; provided
that such amendment or supplement does not adversely affect the rights
of any Holder hereunder;

(2) to comply with Article Six and Section 11.06;

(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities;

(4) to make any other change that does not adversely affect
the rights of any Securityholder hereunder in any material respect; or

(5) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the TIA;

provided that the Company has delivered to the Trustee an Opinion of Counsel
stating that such amendment or supplement complies with the provisions of this
Section 10.01.

SECTION 10.02. With Consent of Holders.

Subject to Section 7.07, the Company and each Subsidiary
Guarantor, when authorized by a Board Resolution, and the Trustee, together with
the written consent of the Holder or Holders of at least a majority in aggregate
principal amount of the outstanding Securities then outstanding (including
consents obtained in connection with a tender offer or exchange offer for such
Securities), may amend or supplement, or waive compliance with any
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provision of, this Indenture, the Securities or any Guarantee without notice to
any other Securityholders. Without the consent of each Securityholder affected,
however, no amendment, supplement or waiver, including a waiver pursuant to
Section 7.04, may:

(1) change the principal amount of Securities whose Holders
must consent to an amendment, supplement or waiver of any provision of
this Indenture, the Securities or the Guarantees;

(2) reduce the rate or extend the time for payment of interest
on any Security;

(3) reduce the principal amount of any Security;

(4) change the Maturity Date of any Security or alter the
redemption provisions in this Indenture or the Securities in a manner
adverse to any Holder;

(5) make any changes in the provisions concerning waivers of
Defaults or Events of Default by Holders of the Securities or the
rights of Holders to recover the principal of, interest on, or
redemption payment with respect to, any Security;

(6) make any changes in this Section 10.02;

(7) make the principal of, or the interest on, any Security
payable with anything or in any manner other than as provided for in
this Indenture, the Securities and the Guarantees as in effect on the
date hereof; or

(8) modify the subordination provisions of this Indenture
(including the related definitions) so as to adversely affect the
ranking of any Security or Guarantee; provided that it is understood
that any amendment the purpose of which is to permit the incurrence of
additional Indebtedness under this Indenture shall not be construed as
to adversely affect the ranking of any Security or Guarantee.

Without the consent of Holders of not less than 75% in
aggregate principal amount of Notes then outstanding, no such amendment,
supplement or waiver may change the Change of Control Payment Date or the
purchase price in connection with any repurchase of Notes pursuant to Section
5.15 in a manner adverse to any Holder or waive a Default or Event of Default
resulting from a failure to comply with Section 5.15.
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It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.

After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.

In connection with any amendment, supplement or waiver under
this Article Ten, the Company may, but shall not be obligated to, offer to any
Holder who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
No amendment, supplement or waiver under this Section shall have a material
adverse effect on the rights of the holders of Senior Indebtedness or Guarantor
Senior Indebtedness without their prior written consent.

SECTION 10.03. Compliance with TIA.

From the date on which the Indenture is qualified under the
TIA, every amendment, waiver or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.

SECTION 10.04. Revocation and Effect of Consents.

Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent Holder may revoke
the consent as to his Security or portion of his Security by notice to the
Trustee or the Company received before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Securities have consented (and not theretofore revoked such consent)
to the amendment, supplement or waiver.

The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver, which record date shall be at least 30 days
prior to the first solicitation of such consent. If a record date is fixed, then
notwithstanding the last
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sentence of the immediately preceding paragraph, those persons who were Holders
at such record date (or their duly designated proxies), and only those persons,
shall be entitled to revoke any consent previously given, whether or not such
persons continue to be Holders after such record date. No such consent shall be
valid or effective for more than 90 days after such record date.

After an amendment, supplement or waiver becomes effective, it
shall bind every Securityholder, unless it makes a change described in any of
clauses (1) through (9) of Section 10.02, in which case, the amendment,
supplement or waiver shall bind only each Holder of a Security who has consented
to it and every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security; provided that any
such waiver shall not impair or affect the right of any Holder to receive
payment of principal of and interest on a Security, on or after the respective
due dates expressed in such Security, or to bring suit for the enforcement of
any such payment on or after such respective dates without the consent of such
Holder.

SECTION 10.05. Notation on or Exchange of Securities.

If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms.

SECTION 10.06. Trustee to Sign Amendments, Etc.

The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Ten; provided that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
stating that the execution of any amendment, supplement or waiver authorized
pursuant to this Article Ten is authorized or permitted by this Indenture.
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ARTICLE ELEVEN

GUARANTEE

SECTION 11.01. Unconditional Guarantee.

Each Subsidiary Guarantor hereby unconditionally, jointly and
severally, guarantees (such guarantee to be referred to herein as the
"Guarantee"), subject to Article Twelve, to each Holder of a Security
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, the Securities or the Obligations of the Company hereunder or
thereunder, that: (i) the principal of and interest on the Securities will be
promptly paid in full when due, subject to any applicable grace period, whether
at maturity, by acceleration or otherwise and interest on the overdue principal,
if any, and interest on any interest, to the extent lawful, of the Securities
and all other obligations of the Company to the Holders or the Trustee hereunder
or thereunder will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and (ii) in case of any extension of time of
payment or renewal of any Securities or of any such other obligations, the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, subject to any applicable grace period, whether at
stated maturity, by acceleration or otherwise, subject, however, in the case of
clauses (i) and (ii) above, to the limitations set forth in Section 11.05. Each
Subsidiary Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Securities or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Securities with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Subsidiary
Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company, protest, notice and all
demands whatsoever and covenants that this Guarantee will not be discharged
except by complete performance of the obligations contained in the Securities,
this Indenture and in this Guarantee. If any Securityholder or the Trustee is
required by any court or otherwise to return to the Company, any Subsidiary
Guarantor, or any custodian, trustee, liquidator or other similar official
acting in relation to the Company or any Subsidiary Guarantor, any amount paid
by the Company or any Subsidiary Guarantor to the Trustee or such
Securityholder,
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this Guarantee, to the extent theretofore discharged, shall be reinstated in
full force and effect. Each Subsidiary Guarantor further agrees that, as between
each Subsidiary Guarantor, on the one hand, and the Holders and the Trustee, on
the other hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Seven for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (y) in the
event of any acceleration of such obligations as provided in Article Seven, such
obligations (whether or not due and payable) shall forthwith become due and
payable by each Subsidiary Guarantor for the purpose of this Guarantee.

SECTION 11.02. Subordination of Guarantee.

The obligations of each Subsidiary Guarantor to the Holders of
Securities and to the Trustee pursuant to the Guarantee and this Indenture are
expressly subordinate and subject in right of payment to the prior payment in
full of all Guarantor Senior Indebtedness of such Subsidiary Guarantor, to the
extent and in the manner provided in Article Twelve.

SECTION 11.03. Severability.

In case any provision of this Guarantee shall be invalid,
illegal or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

SECTION 11.04. Release of a Subsidiary Guarantor.

Upon (i) the release by the lenders under the Term Loans,
related documents and future refinancings thereof of all guarantees of a
Subsidiary Guarantor and all Liens on the property and assets of such Subsidiary
Guarantor relating to such Indebtedness, or (ii) the sale or disposition
(whether by merger, stock purchase, asset sale or otherwise) of a Subsidiary
Guarantor (or all or substantially all its assets) to an entity which is not a
Subsidiary of the Company and which sale or disposition is otherwise in
compliance with the terms of this Indenture, such Subsidiary Guarantor shall be
deemed released from all obligations under this Article Eleven without any
further action required on the part of the Trustee or any Holder; provided,
however, that any such termination shall occur only to the extent that all
obligations of such Subsidiary Guarantor under all of its guarantees of, and
under all of its pledges of assets or other
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security interests which secure, such Indebtedness of the Company shall also
terminate upon such release, sale or transfer.

The Trustee shall deliver an appropriate instrument evidencing
such release upon receipt of a request by the Company accompanied by an
Officers' Certificate and Opinion of Counsel certifying as to the compliance
with this Section 11.04. Any Subsidiary Guarantor not so released remains liable
for the full amount of principal of and interest on the Securities as provided
in this Article Eleven.

SECTION 11.05. Limitation of Subsidiary Guarantor's Liability.

Each Subsidiary Guarantor and by its acceptance hereof each
Holder hereby confirms that it is the intention of all such parties that the
guarantee by such Subsidiary Guarantor pursuant to its Guarantee not constitute
a fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar Federal or state law. To effectuate the foregoing intention, the Holders
and such Subsidiary Guarantor hereby irrevocably agree that the obligations of
such Subsidiary Guarantor under the Guarantee shall be limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor (including, but not limited to, the
Guarantor Senior Indebtedness of such Subsidiary Guarantor) and after giving
effect to any collections from or payments made by or on behalf of any other
Subsidiary Guarantor in respect of the obligations of such other Subsidiary
Guarantor under its Guarantee or pursuant to Section 11.07, result in the
obligations of such Subsidiary Guarantor under the Guarantee not constituting
such fraudulent transfer or conveyance.

SECTION 11.06. Subsidiary Guarantors May Consolidate,
etc., on Certain Terms.

(a) Nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of a Subsidiary Guarantor
with or into the Company or another Subsidiary Guarantor or shall prevent any
sale of assets or conveyance of the property of a Subsidiary Guarantor as an
entirety or substantially as an entirety, to the Company or another Subsidiary
Guarantor. Upon any such consolidation, merger, sale or conveyance, the
Guarantee given by such Subsidiary Guarantor shall no longer have any force or
effect.

(b) Except as set forth in Article Five and Article Six
hereof, nothing contained in this Indenture or in any of the
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Securities shall prevent any consolidation or merger of a Subsidiary Guarantor
with or into a corporation or corporations other than the Company or another
Subsidiary Guarantor (whether or not affiliated with the Subsidiary Guarantor)
or shall prevent any sale of assets or conveyance of the property of a
Subsidiary Guarantor as an entirety or substantially as an entirety, to a
corporation or corporations other than the Company or another Subsidiary
Guarantor (whether or not affiliated with the Subsidiary Guarantor); provided,
however, that, subject to Sections 11.04 and 11.06(a), (i) immediately after
such transaction, and giving effect thereto such transaction does not (a)
violate any covenants set forth herein or (b) results in a Default or Event of
Default under this Indenture that is continuing, and (ii) upon any such
consolidation, merger, sale or conveyance, the Subsidiary Guarantee set forth in
this Article Eleven, and the due and punctual performance and observance of all
of the covenants and conditions of this Indenture to be performed by such
Subsidiary Guarantor, shall be expressly assumed (in the event that the
Subsidiary Guarantor is not the surviving corporation in the merger), by
supplemental indenture satisfactory in form to the Trustee, executed and
delivered to the Trustee, by the corporation formed by such consolidation, or
into which the Subsidiary Guarantor shall have merged, or by the corporation
that shall have acquired such property. In the case of any such consolidation,
merger, sale or conveyance and upon the assumption by the successor corporation,
by supplemental indenture executed and delivered to the Trustee and satisfactory
in form to the Trustee of the due and punctual performance of all of the
covenants and conditions of this Indenture to be performed by the Subsidiary
Guarantor, such successor corporation shall succeed to and be substituted for
the Subsidiary Guarantor with the same effect as if it had been named herein as
a Subsidiary Guarantor; provided, however, that solely for purposes of computing
amounts described in subclause (c) of the first paragraph of Section 5.03, any
such successor corporation shall only be deemed to have succeeded to and be
substituted for any Subsidiary Guarantor with respect to periods subsequent to
the effective time of such merger, consolidation or transfer of assets.

SECTION 11.07. Contribution.

In order to provide for just and equitable contribution among
the Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in
the event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under the Guarantee, such Funding Guarantor shall be
entitled to a contribution from all other Subsidiary Guarantors in a pro rata
amount based on the Adjusted Net Assets of each Subsidiary Guarantor (including
the Funding Guarantor) for all payments,
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damages and expenses incurred by that Funding Guarantor in discharging the
Company's obligations with respect to the Securities or any other Subsidiary
Guarantor's obligations with respect to the Guarantee. "Adjusted Net Assets" of
such Subsidiary Guarantor at any date shall mean the lesser of the amount by
which (x) the fair value of the property of such Subsidiary Guarantor exceeds
the total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date (other than liabilities of such Subsidiary
Guarantor under Subordinated Indebtedness)), but excluding liabilities under the
Guarantee, of such Subsidiary Guarantor at such date and (y) the present fair
salable value of the assets of such Subsidiary Guarantor at such date exceeds
the amount that will be required to pay the probable liability of such
Subsidiary Guarantor on its debts including, without limitation, Guarantor
Senior Indebtedness (after giving effect to all other fixed and contingent
liabilities incurred or assumed on such date and after giving effect to any
collection from any Subsidiary of such Subsidiary Guarantor in respect of the
obligations of such Subsidiary under the Guarantee), excluding debt in respect
of the Guarantee of such Subsidiary Guarantor, as they become absolute and
matured.

SECTION 11.08. Waiver of Subrogation.

Until all Guarantee Obligations are paid in full each
Subsidiary Guarantor hereby irrevocably waives any claim or other rights which
it may now or hereafter acquire against the Company that arise from the
existence, payment, performance or enforcement of such Subsidiary Guarantor's
obligations under the Guarantee and this Indenture, including, without
limitation, any right of subrogation, reimbursement, exoneration,
indemnification, and any right to participate in any claim or remedy of any
Holder of Securities against the Company, whether or not such claim, remedy or
right arises in equity, or under contract, statute or common law, including,
without limitation, the right to take or receive from the Company, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim or other rights. If any amount
shall be paid to any Subsidiary Guarantor in violation of the preceding sentence
and the Securities shall not have been paid in full, such amount shall have been
deemed to have been paid to such Subsidiary Guarantor for the benefit of, and
held in trust for the benefit of, the Holders of the Securities, and shall,
subject to the provisions of Section 11.02, Article Four and Article Twelve,
forthwith be paid to the Trustee for the benefit of such Holders to be credited
and applied upon the Securities, whether matured or unmatured, in accordance
with the terms of this Indenture. Each Subsidiary
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Guarantor acknowledges that it will receive direct and indirect benefits from
the financing arrangements contemplated by this Indenture and that the waiver
set forth in this Section 11.08 is knowingly made in contemplation of such
benefits.

SECTION 11.09. Execution of Guarantee.

To evidence their guarantee to the Securityholders set forth
in this Article Eleven, the Subsidiary Guarantors hereby agree to execute the
Guarantee in substantially the form included in Exhibit A and Exhibit B, which
shall be endorsed on each Security ordered to be authenticated and delivered by
the Trustee. Each Subsidiary Guarantor hereby agrees that its Guarantee set
forth in this Article Eleven shall remain in full force and effect
notwithstanding any failure to endorse on each Security a notation of such
Guarantee. Each such Guarantee shall be signed on behalf of each Subsidiary
Guarantor by two Officers, or an Officer and an Assistant Secretary or one
Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to such Guarantee prior to the authentication of the
Security on which it is endorsed, and the delivery of such Security by the
Trustee, after the authentication thereof hereunder, shall constitute due
delivery of such Guarantee on behalf of such Subsidiary Guarantor. Such
signatures upon the Guarantee may be by manual or facsimile signature of such
officers and may be imprinted or otherwise reproduced on the Guarantee, and in
case any such officer who shall have signed the Guarantee shall cease to be such
officer before the Security on which such Guarantee is endorsed shall have been
authenticated and delivered by the Trustee or disposed of by the Company, such
Security nevertheless may be authenticated and delivered or disposed of as
though the person who signed the Guarantee had not ceased to be such officer of
the Subsidiary Guarantor.

SECTION 11.10. Waiver of Stay, Extension or Usury Laws.

Each Subsidiary Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive each
such Subsidiary Guarantor from performing its Guarantee as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) each such Subsidiary Guarantor hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the
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execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.

ARTICLE TWELVE

SUBORDINATION OF GUARANTEE OBLIGATIONS

SECTION 12.01. Guarantee Obligations Subordinated
to Guarantor Senior Indebtedness.

Anything herein to the contrary notwithstanding, each of the
Subsidiary Guarantors, for itself and its successors, and each Holder, by his
acceptance of Guarantees, agrees, that any payment of obligations by a
Subsidiary Guarantor in respect of its Guarantee (collectively, as to any
Subsidiary Guarantor, its "Guarantee Obligations") is subordinated, to the
extent and in the manner provided in this Article Twelve, to the prior payment
in full in cash or Cash Equivalents of all Guarantor Senior Indebtedness of such
Subsidiary Guarantor.

This Article Twelve shall constitute a continuing offer to all
persons who become holders of, or continue to hold, Guarantor Senior
Indebtedness, and such provisions are made for the benefit of the holders of
Guarantor Senior Indebtedness and such holders are made obligees hereunder and
any one or more of them may enforce such provisions.

SECTION 12.02. Suspension of Guarantee Obligations When
Guarantor Senior Indebtedness in Default.

(a) Unless Section 12.03 shall be applicable, upon (1) the
occurrence of a Payment Default with respect to any Designated Senior
Indebtedness or Significant Senior Indebtedness guaranteed by a Subsidiary
Guarantor (which guarantee consititutes Guarantor Senior Indebtedness of such
Subsidiary Guarantor) and (2) receipt by the Trustee, the Company and such
Subsidiary Guarantor from the Representatives of written notice of such
occurrence, then no payment (other than payments previously made pursuant to
Article Nine hereof) or distribution of any assets of such Subsidiary Guarantor
of any kind or character shall be made by such Subsidiary Guarantor on account
of any Obligations under the Securities or on account of the purchase,
redemption or other acquisition of Securities or any of the obligations of such
Subsidiary Guarantor under this Guarantee unless and until such Payment Default
shall have been cured or waived or shall have
<PAGE> 112
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ceased to exist or such Guarantor Senior Indebtedness shall have been discharged
or paid in full in cash or Cash Equivalents, after which such Guarantor shall
resume making any and all required payments in respect of its obligations under
this Guarantee.

(b) Unless Section 12.03 shall be applicable upon (1) the
occurrence of a Non-payment Default with respect to any Designated Senior
Indebtedness guaranteed by a Subsidiary Guarantor (which guarantee constitutes
Guarantor Senior Indebtedness of such Subsidiary Guarantor) and (2) the earlier
of (i) receipt by the Trustee, the Company and such Subsidiary Guarantor from
the Representatives of written notice of such occurrence stating that such
notice is a "Payment Blockage Notice" pursuant to Sections 4.02(b) and 12.02(b)
of this Indenture or (ii) if such Non-payment Default results from the
acceleration of the Securities, the date of the acceleration of the Securities,
no payment (other than payments previously made pursuant to Article Nine hereof)
or distribution of any assets of such Subsidiary Guarantor of any kind or
character shall be made by such Guarantor on account of principal, premium, if
any, or interest on the Securities or on account of the purchase, redemption or
other acquisition of Securities or on account of any of the other obligations of
such Subsidiary Guarantor under this Guarantee for a period ("Guarantor Payment
Blockage Period") commencing on the date of receipt by the Trustee of such
notice or the date of the acceleration referred to in clause (ii) above, as the
case may be, unless and until the earlier to occur of the following events: (w)
179 days shall have elapsed since receipt of such written notice by the Trustee
or the date of the acceleration of the Securities, as the case may be (provided
such Guarantor Senior Indebtedness shall theretofore not have been accelerated),
(x) such Non-payment Default shall have been cured or waived or shall have
ceased to exist, (y) such Guarantor Senior Indebtedness shall have been
discharged or paid in full or (z) such Guarantor Payment Blockage Period shall
have been terminated by written notice to the Trustee from the Representative
initiating such Guarantor Payment Blockage Period, or the holders of at least a
majority in principal amount of such issue of such Guarantor Senior
Indebtedness, after which, in the case of clause (w), (x), (y) or (z), the
Subsidiary Guarantor shall resume making any and all required payments in
respect of its obligations under this Guarantee. Notwithstanding any other
provisions of this Indenture, only one Guarantor Payment Blockage Period may be
commenced within any consecutive 365 day period and no Non-payment Default with
respect to Guarantor Senior Indebtedness guaranteed by any Subsidiary Guarantor
(which guarantee constitutes Guarantor Senior Indebtedness of such Subsidiary
Guarantor) which existed or was continuing on the date of the commencement of
any Guarantor Payment Blockage Period shall be, or be made, the basis for the
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commencement of a second Guarantor Payment Blockage Period, whether or not
within a period of 365 consecutive days, unless such event of default shall have
been cured or waived for a period of not less than 90 consecutive days. In no
event shall a Guarantor Payment Blockage Period extend beyond 179 days from the
date of the receipt of the notice by the Trustee or the date of the acceleration
of the Securities referred to in clause (2).

(c) In the event that, notwithstanding the foregoing, the
Trustee or the Holder of any Security shall have received any payment prohibited
by the foregoing provisions of this Section 12.02, then and in such event such
payment shall be segregated from other funds and held in trust by the Trustee or
such Holder or Paying Agent for the benefit of, and shall immediately be paid
over to the holders of Senior Indebtedness or to the Representatives or as a
court of competent jurisdiction shall direct.

SECTION 12.03. Guarantee Obligations Subordinated to Prior
Payment of All Guarantor Senior Indebtedness
on Dissolution, Liquidation or Reorganization
of Such Subsidiary Guarantor.

Upon any payment or distribution of assets of any Subsidiary
Guarantor of any kind or character, whether in cash, property or securities upon
any dissolution, winding up, total or partial liquidation or reorganization of
such Subsidiary Guarantor and whether voluntary or involuntary (including,
without limitation, in bankruptcy, insolvency or receivership proceedings or
upon any assignment for the benefit of creditors or any other marshalling of
assets and liabilities of such Subsidiary Guarantor and whether voluntary or
involuntary):

(a) the holders of all Guarantor Senior Indebtedness of such
Subsidiary Guarantor shall first be entitled to receive payments in
full in cash or Cash Equivalents of all amounts payable under Guarantor
Senior Indebtedness (including, with respect to Designated Senior
Indebtedness and Significant Senior Indebtedness guaranteed by such
Subsidiary Guarantor, any interest accruing after the commencement of
any such proceeding at the rate specified in the applicable Designated
Senior Indebtedness and Significant Senior Indebtedness whether or not
interest is an allowed claim enforceable against the Company in any
such proceeding) before the Holders will be entitled to receive any
payment with respect to the Guarantee, and until all Obligations with
respect to the Guarantor Senior Indebtedness are paid in full in cash
or Cash Equivalents, any distribution to which the Holders would be
entitled shall be made to the holders of Guarantor Senior
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Indebtedness; provided, however, that no payment by any other
Subsidiary Guarantor or the Company shall constitute payment on behalf
of such Subsidiary Guaranty for purposes of this Section 12.03(a);

(b) any payment or distribution of assets of such Subsidiary
Guarantor of any kind or character, whether in cash, property or
securities, to which the Holders or the Trustee on behalf of the
Holders would be entitled except for the provisions of this Article
Twelve, shall be paid by the liquidating trustee or agent or other
person making such a payment or distribution, directly to the holders
of Guarantor Senior Indebtedness of such Subsidiary Guarantor or their
Representatives, ratably according to the respective amounts of such
Guarantor Senior Indebtedness remaining unpaid held or represented by
each, until all such Guarantor Senior Indebtedness remaining unpaid
shall have been paid in full in cash or Cash Equivalents after giving
effect to any concurrent payment or distribution to the holders of such
Guarantor Senior Indebtedness;

(c) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of such Subsidiary Guarantor of any
kind or character, whether in cash, property or securities, shall be
received by the Trustee or the Holders or any Paying Agent in respect
of payment of the Guarantee before all Guarantor Senior Indebtedness of
such Subsidiary Guarantor is paid in full in cash or Cash Equivalents,
such payment or distribution (subject to the provisions of Sections
12.06 and 12.07) shall be received, segregated from other funds, and
held in trust by the Trustee or such Holder or Paying Agent for the
benefit of, and shall immediately be paid over to, the holders of such
Guarantor Senior Indebtedness or their Representatives, ratably
according to the respective amounts of such Guarantor Senior
Indebtedness held or represented by each, until all such Guarantor
Senior Indebtedness remaining unpaid shall have been paid in full in
cash or Cash Equivalents, after giving effect to any concurrent payment
or distribution to the holders of Guarantor Senior Indebtedness.

Each Subsidiary Guarantor shall give prompt notice to the
Trustee prior to any dissolution, winding up, total or partial liquidation or
total or reorganization (including, without limitation, in bankruptcy,
insolvency, or receivership proceedings or upon any assignment for the benefit
of creditors or any other marshalling of such Subsidiary Guarantor's assets and
liabilities).
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SECTION 12.04. Holders of Guarantee Obligations To Be
Subrogated to Rights of Holders of
Guarantor Senior Indebtedness.

Subject to the payment in full in cash or Cash Equivalents of
all Guarantor Senior Indebtedness, the Holders of Guarantee Obligations of a
Subsidiary Guarantor shall be subrogated to the rights of the holders of
Guarantor Senior Indebtedness of such Subsidiary Guarantor to receive payments
or distributions of assets of such Subsidiary Guarantor applicable to such
Guarantor Senior Indebtedness until all amounts owing on or in respect of the
Guarantee Obligations shall be paid in full in cash or Cash Equivalents, and for
the purpose of such subrogation no payments or distributions to the holders of
such Guarantor Senior Indebtedness by or on behalf of such Subsidiary Guarantor,
or by or on behalf of the Holders by virtue of this Article Twelve, which
otherwise would have been made to the Holders, shall, as between such Subsidiary
Guarantor and the Holders, be deemed to be payment by such Subsidiary Guarantor
to or on account of such Guarantor Senior Indebtedness, it being understood that
the provisions of this Article Twelve are and are intended solely for the
purpose of defining the relative rights of the Holders, on the one hand, and the
holders of such Guarantor Senior Indebtedness, on the other hand.

If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article Twelve shall
have been applied, pursuant to the provisions of this Article Twelve, to the
payment of all amounts payable under such Guarantor Senior Indebtedness, then
the Holders shall be entitled to receive from the holders of such Guarantor
Senior Indebtedness any payments or distributions received by such holders of
such Guarantor Senior Indebtedness in excess of the amount sufficient to pay all
amounts payable under or in respect of such Guarantor Senior Indebtedness in
full in cash or Cash Equivalents.

SECTION 12.05. Obligations of the Subsidiary
Guarantors Unconditional.

Nothing contained in this Article Twelve or elsewhere in this
Indenture or in the Guarantees is intended to or shall impair, as between the
Subsidiary Guarantors and the Holders, the obligation of the Subsidiary
Guarantors, which is absolute and unconditional, to pay to the Holders all
amounts due and payable under the Guarantees as and when the same shall become
due and payable in accordance with their terms, or is intended to or shall
affect the relative rights of the Holders and creditors of the Subsidiary
Guarantors other than the holders of the Guarantor
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Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or
any Holder from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article Twelve, of the holders of Guarantor Senior Indebtedness in respect of
cash, property or securities of the Subsidiary Guarantors received upon the
exercise of any such remedy. Upon any payment or distribution of assets of any
Subsidiary Guarantor referred to in this Article Twelve, the Trustee, subject to
the provisions of Sections 8.01 and 8.02, and the Holders shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction in
which any dissolution, winding up, liquidation or reorganization proceedings are
pending, or a certificate of the receiver, trustee in bankruptcy, liquidating
trustee or agent or other person making any payment or distribution to the
Trustee or to the Holders for the purpose of ascertaining the persons entitled
to participate in such payment or distribution, the holders of Guarantor Senior
Indebtedness and other Indebtedness of any Subsidiary Guarantor, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article Twelve. Nothing in this
Section 12.05 shall apply to the claims of, or payments to, the Trustee under or
pursuant to Section 8.07.

SECTION 12.06. Trustee Entitled to Assume Payments
Not Prohibited in Absence of Notice.

The Trustee shall not at any time be charged with knowledge of
the existence of any facts that would prohibit the making of any payment to or
by the Trustee unless and until the Trustee or any Paying Agent shall have
received notice thereof from the Company or any Subsidiary Guarantor or from one
or more holders of Guarantor Senior Indebtedness or from any Representative
therefor and, prior to the receipt of any such notice, the Trustee shall be
entitled in all respects conclusively to assume that no such fact exists.

SECTION 12.07. Application by Trustee of Assets Deposited
with It.

U.S. Legal Tender or U.S. Government Obligations deposited in
trust with the Trustee pursuant to and in accordance with Sections 9.01 and 9.02
shall be for the sole benefit of Securityholders and, to the extent allocated
for the payment of Securities, shall not be subject to the subordination
provisions of this Article Twelve. Otherwise, any deposit of assets or
securities by or on behalf of a Subsidiary Guarantor with the Trustee or any
Paying Agent (whether or not in trust) for payment
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of the Guarantee shall be subject to the provisions of this Article Twelve;
provided that if prior to the second Business Day preceding the date on which by
the terms of this Indenture any such assets may become distributable for any
purpose (including, without limitation, the payment of either principal of or
interest on any Security) the Trustee or such Paying Agent shall not have
received with respect to such assets the notice provided for in Section 12.06,
then the Trustee or such Paying Agent shall have full power and authority to
receive such assets and to apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary received by it
on or after such date. The foregoing shall not apply to the Paying Agent if the
Company or any Subsidiary or Affiliate of the Company is acting as Paying Agent.
Nothing contained in this Section 12.07 shall limit the right of the holders of
Guarantor Senior Indebtedness to recover payments as contemplated by this
Article Twelve.

SECTION 12.08. No Waiver of Subordination Provisions.

(a) No right of any present or future holder of any Guarantor
Senior Indebtedness to enforce subordination as herein provided shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of any Subsidiary Guarantor or by any act or failure to act by any such
holder, or by any non-compliance by any Subsidiary Guarantor with the terms,
provisions and covenants of this Indenture, regardless of any knowledge thereof
any such holder may have or be otherwise charged with.

(b) Without limiting the generality of subsection (a) of this
Section 12.08, the holders of Guarantor Senior Indebtedness may, at any time and
from time to time, without the consent of or notice to the Trustee or the
Holders of the Securities, without incurring responsibility to the Holders of
the Securities and without impairing or releasing the subordination provided in
this Article Twelve or the obligations hereunder of the Holders of the
Securities to the holders of Guarantor Senior Indebtedness, do any one or more
of the following: (1) change the manner, place, terms or time of payment of, or
renew or alter, Guarantor Senior Indebtedness or any instrument evidencing the
same or any agreement under which Guarantor Senior Indebtedness is outstanding;
(2) sell, exchange, release or otherwise deal with any property pledged,
mortgaged or otherwise securing Guarantor Senior Indebtedness; (3) release any
person liable in any manner for the collection or payment of Guarantor Senior
Indebtedness; and (4) exercise or refrain from exercising any rights against the
Company and any other person.
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SECTION 12.09. Holders Authorize Trustee to Effectuate
Subordination of Guarantee Obligations.

Each Holder of the Guarantee Obligations by his acceptance
thereof authorizes and expressly directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effect the subordination provisions
contained in this Article Twelve, and appoints the Trustee his attorney-in-fact
for such purpose, including, in the event of any dissolution, winding up,
liquidation or reorganization of any Subsidiary Guarantor (whether in
bankruptcy, insolvency or receivership proceedings or upon an assignment for the
benefit of creditors or any other marshalling of assets and liabilities of any
Subsidiary Guarantor) tending towards liquidation or reorganization of the
business and assets of any Subsidiary Guarantor, the immediate filing of a claim
for the unpaid balance under its or his Guarantee Obligations in the form
required in said proceedings and cause said claim to be approved. If the Trustee
does not file a proper claim or proof of debt in the form required in such
proceeding prior to 30 days before the expiration of the time to file such claim
or claims, then any of the holders of the Guarantor Senior Indebtedness or their
Representatives is hereby authorized to file an appropriate claim for and on
behalf of the Holders of said Guarantee Obligations. Nothing herein contained
shall be deemed to authorize the Trustee or the holders of Guarantor Senior
Indebtedness or their Representative to authorize or consent to or accept or
adopt on behalf of any holder of Guarantee Obligations any plan of
reorganization, arrangement, adjustment or composition affecting the Guarantee
Obligations or the rights of any Holder thereof, or to authorize the Trustee or
the holders of Guarantor Senior Indebtedness or their Representative to vote in
respect of the claim of any holder of Guarantee Obligations in any such
proceeding.

SECTION 12.10. Right of Trustee to Hold Guarantor
Senior Indebtedness.

The Trustee shall be entitled to all of the rights set forth
in this Article Twelve in respect of any Guarantor Senior Indebtedness at any
time held by it to the same extent as any other holder of Guarantor Senior
Indebtedness, and nothing in this Indenture shall be construed to deprive the
Trustee of any of its rights as such holder.
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SECTION 12.11. No Suspension of Remedies.

The failure to make a payment in respect of the Guarantees by
reason of any provision of this Article Twelve shall not be construed as
preventing the occurrence of a Default or an Event of Default under Section
7.01.

Nothing contained in this Article Twelve shall limit the right
of the Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to Article Seven or to pursue any rights or
remedies hereunder or under applicable law, subject to the rights, if any, under
this Article Twelve of the holders, from time to time, of Guarantor Senior
Indebtedness.

SECTION 12.12. No Fiduciary Duty of Trustee to Holders
of Guarantor Senior Indebtedness.

The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Guarantor Senior Indebtedness, and shall not be liable to any
such holders (other than for its willful misconduct or gross negligence) if it
shall pay over or deliver to the holders of Guarantee Obligations or the Company
or any other person, money or assets in compliance with the terms of this
Indenture. Nothing in this Section 12.12 shall affect the obligation of any
person other than the Trustee to hold such payment for the benefit of, and to
pay such payment over to, the holders of Guarantor Senior Indebtedness or their
Representative.

ARTICLE THIRTEEN

MISCELLANEOUS

SECTION 13.01. TIA Controls.

If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed by operation of Section 3.18(c) of the TIA,
the imposed duties shall control.

SECTION 13.02. Notices.

Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by telex, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
<PAGE> 120
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if to the Company or any Subsidiary Guarantor:

Dominick's Finer Foods, Inc
505 Railroad Avenue
Northlake, Illinois 60164
Attention: Darren W. Karst,
Chief Financial Officer

if to the Trustee:

United States Trust Company of New York
114 West 47th Street, 15th Floor
New York, New York 10036-1532

Attention: Corporate Trust Division

if to the Credit Agent:

Bankers Trust Company
One Bankers Trust Plaza
130 Liberty Street, 14th Floor
New York, New York 10006

Attention: Michelle Zorn

Each of the Company, the Trustee, the Subsidiary Guarantors
and the Credit Agent by written notice to each other such person may designate
additional or different addresses for notices to such person. Any notice or
communication to the Company, the Trustee, the Subsidiary Guarantors and the
Credit Agent shall be deemed to have been given or made as of the date so
delivered if personally delivered; when answered back, if telexed; when receipt
is acknowledged, if telecopied; and five (5) calendar days after mailing if sent
by registered or certified mail, postage prepaid (except that any notice to the
Trustee and a notice of change of address shall not be deemed to have been given
until actually received by the addressee).

Any notice or communication mailed to a Securityholder shall
be mailed to it by first class mail or other equivalent means at his address as
it appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.

Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or
<PAGE> 121
-113-

communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.

SECTION 13.03. Communications by Holders with Other Holders.

Securityholders may communicate pursuant to TIA Section 312(b)
with other Securityholders with respect to their rights under this Indenture or
the Securities. The Company, the Subsidiary Guarantors, the Trustee, the
Registrar and any other person shall have the protection of TIA Section 312(c).

SECTION 13.04. Certificate and Opinion as to Conditions
Precedent.

Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:

(1) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and

(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.

SECTION 13.05. Statements Required in Certificate or Opinion.

Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 5.07, shall include:

(1) a statement that the person making such certificate or
opinion has read such covenant or condition;

(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;

(3) a statement that, in the opinion of such person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such convenant or
condition has been complied with; and

(4) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied
<PAGE> 122
-114-

with; provided, however, that with respect to matters of fact an
Opinion of Counsel may rely on an Officers' Certificate or certificates
of public officials.

SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.

The Trustee may make reasonable rules for action by or at
a meeting of Securityholders. The Paying Agent or Registrar may make reasonable
rules for its functions.

SECTION 13.07. Legal Holidays.

A "Legal Holiday" used with respect to a particular place of
payment is a Saturday, a Sunday or a day on which banking institutions in New
York, New York, Los Angeles, California or at such place of payment are not
required to be open. If a payment date is a Legal Holiday at such place, payment
may be made at such place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.

SECTION 13.08. Governing Law.

THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. Each of the parties hereto agrees to submit to
the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Indenture.

SECTION 13.09. No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret another indenture,
loan or debt agreement of any of the Company or any of its Subsidiaries. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.

SECTION 13.10. No Recourse Against Others.

A director, officer, employee, stockholder or incorporator, as
such, of the Company shall not have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creations. Each
Securityholder by accepting a Security waives and releases all such liability.
Such waiver and release are part of the consideration for the issuance of the
Securities.
<PAGE> 123
-115-

SECTION 13.11. Successors.

All agreements of the Company and each Subsidiary Guarantor in
this Indenture and the Securities shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successor.

SECTION 13.12. Duplicate Originals.

All parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together shall represent
the same agreement.

SECTION 13.13. Severability.

In case any one or more of the provisions in this Indenture or
in the Securities shall be held invalid, illegal or unenforceable, in any
respect for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions shall not in
any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permitted by law.

SECTION 13.14. No Violation.

Notwithstanding the provisions of this Indenture, in no event
shall any transaction, agreement, payment or other event to be consummated,
entered into or made in connection with the Acquisition or any financing thereof
(including without limitation the transaction referred to in Section 6.01(c)) be
considered a violation of any provision of this Indenture or constitute a Change
of Control hereunder.
<PAGE> 124
-116-

SIGNATURES

IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the date first written above.

Dated: May 4, 1995

DOMINICK'S FINER FOODS, INC.

By: /s/ Darren W. Karst
------------------------------
Name: Darren W. Karst
Title: Senior V.P., CFO

Attest: /s/ Robert A. Mariano
-----------------------
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee

By: /s/ Gerard F. Ganey
-----------------------------
Name: Gerard F. Ganey
Title: Senior Vice President

Attest: /s/ Christine Collins
-----------------------
<PAGE> 125
-117-

THE SUBSIDIARY GUARANTORS:

DOMINICK'S FINER FOODS, INC.
OF ILLINOIS,

By: /s/ Darren W. Karst
------------------------------
Name: Darren W. Karst
Title: Senior V.P., CFO

Attest: /s/ Robert A. Mariano
-----------------------

KOHL'S OF BLOOMINGDALE, INC.

By: /s/ Darren W. Karst
------------------------------
Name: Darren W. Karst
Title: Senior V.P., CFO

Attest: /s/ Robert A. Mariano
-----------------------

DODI HAZELCREST, INC.

By: /s/ Darren W. Karst
------------------------------
Name: Darren W. Karst
Title: Senior V.P., CFO

Attest: /s/ Robert A. Mariano
-----------------------
<PAGE> 126
-118-

SAVE-IT DISCOUNT FOODS
CORPORATION

By: /s/ Darren W. Karst
------------------------------
Name: Darren W. Karst
Title: Senior V.P., CFO

Attest: /s/ Robert A. Mariano
-----------------------

JERRY'S DEEP DISCOUNT CENTERS,
INC.

By: /s/ Darren W. Karst
------------------------------
Name: Darren W. Karst
Title: Senior V.P., CFO

Attest: /s/ Robert A. Mariano
-----------------------
<PAGE> 127
EXHIBIT A

[FORM OF INITIAL SECURITY]

CUSIP NO.: 257150AA0

DOMINICK'S FINER FOODS, INC.

10 7/8% SENIOR SUBORDINATED NOTE DUE 2005

No. $

DOMINICK'S FINER FOODS, INC., a Delaware corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay to or registered assigns, the principal sum of Dollars, on May
1, 2005.

Interest Payment Dates: May 1 and November 1.

Record Dates: April 15 and October 15.

Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.

IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.

Dated: May 4, 1995

Attest: DOMINICK'S FINER FOODS, INC.

________________________ By: ________________________________
Name: Name:
Title: Title:

Certificate Of Authentication

This is one of the 10 7/8% Senior Subordinated Notes due 2005
referred to in the within-mentioned Indenture.

UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee

Dated: May 4, 1995 By _________________________________
Authorized Signatory

A-1
<PAGE> 128
DOMINICK'S FINER FOODS, INC.

10 7/8% Senior Subordinated Notes
due 2005

1. Interest.

DOMINICK'S FINER FOODS, INC., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
the rate per annum shown above. The Company will pay interest semi-annually on
May 1 and November 1 of each year (the "Interest Payment Date"), commencing on
November 1, 1995. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance of the Securities. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.

The Company shall pay interest on overdue principal and
interest on overdue installments of interest, to the extent lawful, at a rate
equal to the rate of interest otherwise payable on the Securities.

2. Method of Payment.

The Company shall pay interest on the Securities (except
defaulted interest) to the persons who are the registered Holders at the close
of business on the Record Date immediately preceding the Interest Payment Date
even if the Securities are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by wire transfer of Federal funds, or
interest by its check payable in such U.S. Legal Tender. The Company may deliver
any such interest payment to the Paying Agent or to a Holder at the Holder's
registered address. Notwithstanding the foregoing, the Company shall pay or
cause to be paid all amounts payable with respect to non-DTC eligible Securities
by wire transfer of Federal funds to the account of the Holders of such
Securities.

3. Paying Agent and Registrar.

Initially, United States Trust Company of New York (the
"Trustee") will act as Paying Agent and Registrar. The Company may change any
Paying Agent, Registrar or co-Registrar without notice to the Holders. The
Company or any of its Subsidiaries may, subject to certain exceptions, act as
Paying Agent, Registrar or co-Registrar.

A-2
<PAGE> 129
4. Indenture and Guarantees.

The Company issued the Securities under an Indenture, dated as
of May 4, 1995 (the "Indenture"), among the Company, the Subsidiary Guarantors
and the Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"),
as in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and said Act for a statement of them. The
Securities are general unsecured obligations of the Company limited in aggregate
principal amount to $200,000,000. Payment on each Security is guaranteed on a
senior subordinated basis, jointly and severally, by the Subsidiary Guarantors
pursuant to Article Eleven of the Indenture. The Securities include the Initial
Securities and the Exchange Securities, as defined below, issued in exchange for
the Initial Securities pursuant to the Indenture. The Initial Securities and the
Exchange Securities are treated as a single class of securities under the
Indenture.

5. Optional Redemption.

On or after May 1, 2000 the Securities may be redeemed in
whole at any time or in part from time to time, at the option of the Company, at
a redemption price equal to the applicable percentage of the principal amount
thereof set forth below, together with accrued interest to the Redemption Date,
if redeemed during the 12 months commencing on May 1 in the years set forth
below:

<TABLE>
<CAPTION>
Year Percentage
---- ----------

<S> <C>
2000.......................... 104.833%
2001.......................... 103.625%
2002.......................... 102.417%
2003.......................... 101.208%
2004 and thereafter........... 100.000%
</TABLE>

In addition, on or prior to May 1, 1998, the Company may, at
its option, use the net cash proceeds of one or more Public Equity Offerings to
redeem up to an aggregate of 33 1/3% of the principal amount of the Securities
originally issued, at a redemption price equal to 110.875% of the principal
amount thereof if redeemed during the period commencing on May 4, 1995, and
ending on April 30, 1996, 109.667%, if redeemed during the 12 months commencing
on May 1, 1996, and 108.458% of the principal amount thereof if redeemed during
the 12 months commencing on May 1, 1997,

A-3
<PAGE> 130
in each case plus accrued interest, if any, to the redemption date; provided
that at least $100 million aggregate principal amount of the Notes remains
outstanding immediately after any such redemption.

The documents evidencing Senior Indebtedness will restrict
the Company's ability to optionally redeem the Securities.

6. Notice of Redemption.

Notice of redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder of Securities to be
redeemed at such Holder's registered address. In order to effect a redemption
with the proceeds of a Public Equity Offering, the Company shall send the
redemption notice not later than 60 days after the consummation of such Public
Equity Offering. Securities in denominations larger than $1,000 may be redeemed
in part.

Except as set forth in the Indenture, from and after any
Redemption Date, if monies for the redemption of the Securities called for
redemption shall have been deposited with the Paying Agent for redemption on
such Redemption Date and payment of the Securities called for redemption is not
prohibited under Article Four or Article Twelve of the Indenture, then, unless
the Company defaults in the payment of such Redemption Price, the Securities
called for redemption will cease to bear interest and the only right of the
Holders of such Securities will be to receive payment of the Redemption Price.

7. Change of Control Offer.

Upon the occurrence of a Change of Control, each Holder shall
have the right to require the Company to repurchase such Holder's Securities
pursuant to a Change of Control Offer at a purchase price equal to 101% of the
principal amount thereof plus accrued interest, if any, to the date of purchase.
The Company shall not be required to repurchase Securities until it has complied
with its covenants to repay in full all Indebtedness of the Company and its
Subsidiaries under the Senior Credit Facilities or offer to repay in full all
such Indebtedness and repay the Indebtedness of each lender who has accepted its
offer to repay such Indebtedness or to obtain the requisite consent under the
Senior Credit Facilities to permit the repurchase of the Securities pursuant to
a Change of Control Offer.

8. Limitation on Asset Sales.

Under certain circumstances the Company is required to apply
the net proceeds from Asset Sales to the repayment of Pari Passu Indebtedness or
Senior Indebtedness, to make Related Business Investments, an investment in
properties and assets that replace

A-4
<PAGE> 131
the properties and assets that are the subject of such Asset Sale, an investment
in properties and assets that will be used in the business of the Company and
its Subsidiaries existing on the Issue Date or in a business reasonably related
thereto, to be applied against capital expenditures made to acquire or construct
a replacement store in the general vicinity of the store sold or to purchase in
a Net Proceeds Offer (at a price equal to 100% of the aggregate principal amount
thereof, plus accrued interest to the date of purchase) such aggregate principal
amount of Securities which, when added to the accrued interest thereon, shall be
equal to the net proceeds required to be applied thereto.

9. Denominations; Transfer; Exchange.

The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption.

10. Persons Deemed Owners.

The registered Holder of a Security shall be treated as the
owner of it for all purposes.

11. Unclaimed Money.

If money for the payment of principal or interest remains
unclaimed for two years, the Trustee and the Paying Agents will pay the money
back to the Company at its request. After that, all liability of the Trustee and
such Paying Agents with respect to such money shall cease.

12. Discharge Prior to Redemption or Maturity.

If the Company at any time deposits with the Trustee U.S.
Legal Tender or U.S. Government Obligations sufficient to pay the principal of
and interest on the Securities to redemption or maturity and complies with the
other provisions of the Indenture relating thereto, the Company will be
discharged from certain provisions of the Indenture and the Securities
(including the financial covenants, but excluding its obligation to pay the
principal of and interest on the Securities).

A-5
<PAGE> 132
13. Amendment; Supplement; Waiver.

Subject to certain exceptions, the Indenture, the Securities
and the Guarantees may be amended or supplemented with the written consent of
the Holders of at least a majority in aggregate principal amount of the
Securities then outstanding, and any existing Default or Event of Default or
compliance with any provision may be waived with the consent of the Holders of a
majority in aggregate principal amount of the Securities then outstanding.
Without notice to or consent of any Holder, the parties thereto may amend or
supplement the Indenture or the Securities to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities, comply with Article Six or
Section 11.06 of the Indenture, or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not adversely affect the rights of any Holder of a
Security.

14. Restrictive Covenants.

The Indenture imposes certain limitations on the ability of
the Company and its Subsidiaries to, among other things, incur additional
Indebtedness or Liens, make payments in respect of its Capital Stock and merge
or consolidate with any other person and sell, lease, transfer or otherwise
dispose of substantially all of its properties or assets. The limitations are
subject to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.

15. Subordination.

The Securities will be subordinated in right of payment to
the prior payment in full of all Senior Indebtedness (as defined in the
Indenture) of the Company. The Guarantees are subordinated in right of payment,
in the manner and to the extent set forth in the Indenture, to the prior payment
in full of Guarantor Senior Indebtedness (as defined in the Indenture). To the
extent and in the manner provided in the Indenture, Senior Indebtedness, and in
the case of payment by a Subsidiary Guarantor, Guarantor Senior Indebtedness,
must be paid before any payment may be made to any Holder of this Security. Any
Securityholder by accepting this Security agrees to the subordination and
authorizes the Trustee to give it effect.

16. Successors.

When a successor assumes all the obligations of its
predecessor under the Securities and the Indenture, the predecessor will be
released from those obligations.

A-6
<PAGE> 133
17. Defaults and Remedies.

If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Securities. Subject to certain limitations,
Holders of a majority in aggregate principal amount of the Securities then
outstanding may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of Securities notice of any continuing Default
or Event of Default (except a Default in payment of principal or interest,
including an Accelerated Payment) if it determines that withholding notice is in
their interest.

18. Trustee Dealings with Company.

The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Securities and may otherwise
deal with the Company, its Subsidiaries or their respective Affiliates as if it
were not the Trustee.

19. No Recourse Against Others.

No stockholder, director, officer, employee or incorporator,
as such, of the Company shall have any liability for any obligation of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of, such obligations or their creation. Each Holder of a
Security by accepting a Security waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the
Securities.

20. Authentication.

This Security shall not be valid until the Trustee or
authenticating agent manually signs the certificate of authentication on this
Security.

21. Abbreviations and Defined Terms.

Customary abbreviations may be used in the name of a Holder
of a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).

A-7
<PAGE> 134
22. CUSIP Numbers.

Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company will cause CUSIP numbers
to be printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.

The Company will furnish to any Holder of a Security
upon written request and without charge a copy of the Indenture.
Requests may be made to: Dominick's Finer Foods, Inc., 505
Railroad Avenue, Northlake, Illinois 60164, Attn: Darren W. Karst,
Chief Financial Officer.

23. Registration Rights.

Pursuant to the Registration Rights Agreement among the
Company, the Subsidiary Guarantors and the Initial Purchasers on behalf of
Holders of the Initial Securities, the Company will be obligated to consummate
an exchange offer pursuant to which the Holder of this Security shall have the
right to exchange this Security for the Company's Series B 10 7/8% Senior
Subordinated Notes due 2005 (the "Exchange Securities"), which have been
registered under the Securities Act, in like principal amount and having terms
identical in all material respects as the Initial Securities. The Holders of the
Initial Securities shall be entitled to receive certain additional interest
payments in the event such exchange offer is not consummated and upon certain
other conditions, all pursuant to and in accordance with the terms of the
Registration Rights Agreement. Additional interest which may be payable pursuant
to the Registration Rights Agreement shall be payable in the same manner as set
forth herein with respect to the stated interest. The provision of the
Registration Rights Agreement relating to such additional interest are
incorporated herein by reference and made a part hereof as if set forth herein
in full.

A-8
<PAGE> 135
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]

SENIOR SUBORDINATED GUARANTEE

The Subsidiary Guarantors (as defined in the Indenture (the
"Indenture") referred to in the Security upon which this notation is endorsed
and each hereinafter referred to as a "Subsidiary Guarantor," which term
includes any successor person under the Indenture) have unconditionally
guaranteed on a senior subordinated basis (such guarantee by each Subsidiary
Guarantor being referred to herein as the "Guarantee") (i) the due and punctual
payment of the principal of and interest on the Securities, whether at maturity,
by acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and interest, if any, on the Securities, to the extent lawful,
and the due and punctual performance of all other obligations of the Company to
the Holders or the Trustee all in accordance with the terms set forth in Article
Eleven and Article Twelve of the Indenture and (ii) in case of any extension of
time of payment or renewal of any Securities or any of such other obligations,
that the same will be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.

The obligations of each Subsidiary Guarantor to the Holders
of Securities and to the Trustee pursuant to the Guarantee and the Indenture are
expressly set forth and are expressly subordinated and subject in right of
payment to the prior payment in full of all Guarantor Senior Indebtedness of
such Subsidiary Guarantor, to the extent and in the manner provided, in Article
Eleven and Article Twelve of the Indenture, and reference is hereby made to such
Indenture for the precise terms of the Guarantee therein made.

No stockholder, officer, director or incorporator, as such,
past, present or future, of any Subsidiary Guarantor shall have any liability
under the Guarantee by reason of his or its status as such stockholder, officer,
director or incorporator.

A-9
<PAGE> 136
The Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Securities upon which the
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.

SUBSIDIARY GUARANTORS:

DOMINICK'S FINER FOODS, INC.
OF ILLINOIS,

By: _______________________________
Name:
Title:

Attest: ___________________

KOHL'S OF BLOOMINGDALE, INC.

By: _______________________________
Name:
Title:

Attest: ____________________

DODI HAZELCREST, INC.

By: _______________________________
Name:
Title:

Attest: ____________________

SAVE-IT DISCOUNT FOODS
CORPORATION

By: _______________________________
Name:
Title:

Attest: ___________________

A-10
<PAGE> 137
JERRY'S DEEP DISCOUNT CENTERS,

INC.

By: _______________________________
Name:
Title:

Attest: ____________________

A-11
<PAGE> 138
[FORM OF ASSIGNMENT]

I or we assign this Security to

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)

Please insert Social Security or other
identifying number of assignee

- --------------------------------------------

and irrevocably appoint agent to transfer this Security
on the books of the Company. The agent may substitute another to act for him.

Dated: Signed:
-------------------- ---------------------------

- --------------------------------------------------------------------------------
(Sign exactly as your name appears on
the front of this Security)

Signature Guarantee:
-----------------------------------------------------------

In connection with any transfer of this Security occurring
prior to the date which is the earlier of (i) the date of the declaration by the
SEC of the effectiveness of a registration statement under the Securities Act of
1933, as amended (the "Securities Act") covering resales of this Security (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) May 4, 1998, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Security is being transferred:

A-12
<PAGE> 139
[Check One]

(1) __ to the Company or a subsidiary thereof; or

(2) __ pursuant to and in compliance with Rule 144A under the Securities
Act; or

(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Trustee a signed letter containing certain
representations and agreements (the form of which letter can be
obtained from the Trustee); or

(4) __ outside the United states to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act; or

(5) __ pursuant to the exemption from registration provided by Rule 144
under the Securities Act; or

(6) __ pursuant to an effective registration statement under the Securities
Act; or

(7) __ pursuant to another available exemption from the registration
requirements of the Securities Act.

Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered Holder thereof; provided that if box (3), (4), (5) or (7) is
checked, the Company or the Trustee may require, prior to registering any such
transfer of the Securities, in its sole discretion, such legal opinions,
certifications (including an investment letter in the case of box (3) or (4))
and other information as the Trustee or the Company has reasonably requested to
confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.

A-13
<PAGE> 140
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Security in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.16 of the Indenture shall have
been satisfied.

Dated: ________________________ Signed: _______________________________________
(Sign exactly as name
appears on the other side
of this Security)

Signature Guarantee: ___________________________________________________________

TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED

The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.

Dated: ______________________ ____________________________________
NOTICE: To be executed by
an executive officer

A-14
<PAGE> 141
OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Security purchased by the
Company pursuant to Section 5.15 or Section 5.16 of the Indenture, check the
appropriate box:

Section 5.15 [ ] Section 5.16 [ ]

If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 5.15 or Section 5.16 of the
Indenture, state the amount:

Date:__________ Signature:_________________________________
(Sign exactly as your name
appears on the front of
this Security)

Signature Guarantee: ___________________________________________________________

A-15
<PAGE> 142
EXHIBIT B

[FORM OF EXCHANGE SECURITY]

CUSIP NO.:

DOMINICK'S FINER FOODS, INC.

SERIES B 10 7/8% SENIOR SUBORDINATED NOTE DUE 2005

No. $

Interest Payment Dates: May 1 and November 1.

Record Dates: April 15 and October 15.

Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.

IN WITNESS WHEREOF, the Company has caused this Security to
be signed manually or by facsimile by its duly authorized officers.

Dated:

Attest: DOMINICK'S FINER FOODS, INC.

_________________________ By:_________________________________
Name: Name:
Title: Title:

Certificate Of Authentication

This is one of the Series B 10 7/8% Senior Subordinated Notes
due 2005 referred to in the within-mentioned Indenture.

UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee

Dated: By__________________________________
Authorized Signatory

B-1
<PAGE> 143
DOMINICK'S FINER FOODS, INC.

Series B 10 7/8% Senior Subordinated Notes
due 2005

1. Interest.

2. Method of Payment.

3. Paying Agent and Registrar.

B-2
<PAGE> 144
4. Indenture and Guarantees.

The Company issued the Securities under an Indenture, dated
as of May 4, 1995 (the "Indenture"), among the Company, the Subsidiary
Guarantors and the Trustee. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the
"TIA"), as in effect on the date of the Indenture until such time as the
Indenture is qualified under the TIA, and thereafter as in effect on the date on
which the Indenture is qualified under the TIA. Notwithstanding anything to the
contrary herein, the Securities are subject to all such terms, and Holders of
Securities are referred to the Indenture and said Act for a statement of them.
The Securities are general unsecured obligations of the Company limited in
aggregate principal amount to $200,000,000. Payment on each Security is
guaranteed on a senior subordinated basis, jointly and severally, by the
Subsidiary Guarantors pursuant to Article Eleven of the Indenture. The
Securities include the Initial Securities and the Exchange Securities, as
defined below, issued in exchange for the Initial Securities pursuant to the
Indenture. The Initial Securities and the Exchange Securities are treated as a
single class of securities under the Indenture.

5. Optional Redemption.

<TABLE>
<CAPTION>
Year Percentage
---- ----------

<S> <C>
2000............................... 104.833%
2001............................... 103.625%
2002............................... 102.417%
2003............................... 101.208%
2004 and thereafter................ 100.000%
</TABLE>

B-3
<PAGE> 145
in each case plus accrued interest, if any, to the redemption date; provided
that at least $100 million aggregate principal amount of the Notes remains
outstanding immediately after any such redemption.

The documents evidencing Senior Indebtedness will restrict the
Company's ability to optionally redeem the Securities.

6. Notice of Redemption.

7. Change of Control Offer.

8. Limitation on Asset Sales.

B-4
<PAGE> 146
the properties and assets that are the subject of such Asset Sale, an investment
in properties and assets that will be used in the business of the Company and
its Subsidiaries existing on the Issue Date or in a business reasonably related
thereto, to be applied against capital expenditures made to acquire or construct
a replacement store in the general vicinity of the store sold or to purchase in
a Net Proceeds Offer (at a price equal to 100% of the aggregate principal amount
thereof, plus accrued interest to the date of purchase) such aggregate principal
amount of Securities which, when added to the accrued interest thereon, shall be
equal to the net proceeds required to be applied thereto.

9. Denominations; Transfer; Exchange.

10. Persons Deemed Owners.

The registered Holder of a Security shall be treated as the
owner of it for all purposes.

11. Unclaimed Money.

12. Discharge Prior to Redemption or Maturity.

B-5
<PAGE> 147
13. Amendment; Supplement; Waiver.

14. Restrictive Covenants.

15. Subordination.

The Securities will be subordinated in right of payment to the
prior payment in full of all Senior Indebtedness (as defined in the Indenture)
of the Company. The Guarantees are subordinated in right of payment, in the
manner and to the extent set forth in the Indenture, to the prior payment in
full of Guarantor Senior Indebtedness (as defined in the Indenture). To the
extent and in the manner provided in the Indenture, Senior Indebtedness, and in
the case of payment by a Subsidiary Guarantor, Guarantor Senior Indebtedness,
must be paid before any payment may be made to any Holder of this Security. Any
Securityholder by accepting this Security agrees to the subordination and
authorizes the Trustee to give it effect.

16. Successors.

When a successor assumes all the obligations of its
predecessor under the Securities and the Indenture, the predecessor will be
released from those obligations.

B-6
<PAGE> 148
17. Defaults and Remedies.

18. Trustee Dealings with Company.

19. No Recourse Against Others.

20. Authentication.

This Security shall not be valid until the Trustee or
authenticating agent manually signs the certificate of authentication on this
Security.

21. Abbreviations and Defined Terms.

Customary abbreviations may be used in the name of a Holder of
a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).

B-7
<PAGE> 149
22. CUSIP Numbers.

The Company will furnish to any Holder of a Security upon
written request and without charge a copy of the Indenture. Requests may be made
to: Dominick's Finer Foods, Inc., 505 Railroad Avenue, Northlake, Illinois
60164, Attn: Darren W. Karst, Chief Financial Officer.

B-8
<PAGE> 150
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]

SENIOR SUBORDINATED GUARANTEE

The obligations of each Subsidiary Guarantor to the Holders of
Securities and to the Trustee pursuant to the Guarantee and the Indenture are
expressly set forth and are expressly subordinated and subject in right of
payment to the prior payment in full of all Guarantor Senior Indebtedness of
such Subsidiary Guarantor, to the extent and in the manner provided, in Article
Eleven and Article Twelve of the Indenture, and reference is hereby made to such
Indenture for the precise terms of the Guarantee therein made.

B-9
<PAGE> 151
The Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Securities upon which the
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.

SUBSIDIARY GUARANTORS:

DOMINICK'S FINER FOODS, INC.
OF ILLINOIS,

By: _______________________________
Name:
Title:

Attest: ___________________

KOHL'S OF BLOOMINGDALE, INC.

By: _______________________________
Name:
Title:

Attest: ____________________

DODI HAZELCREST, INC.

By: _______________________________
Name:
Title:

Attest: ____________________

SAVE-IT DISCOUNT FOODS
CORPORATION

By: _______________________________
Name:
Title:

Attest: ___________________

B-10
<PAGE> 152
JERRY'S DEEP DISCOUNT CENTERS,
INC.

By: _______________________________
Name:
Title:

Attest: ____________________

B-11
<PAGE> 153
[FORM OF ASSIGNMENT]

I or we assign this Security to

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)

Please insert Social Security or other
identifying number of assignee

- ----------------------------------------------

and irrevocably appoint agent to transfer this Security
on the books of the Company. The agent may substitute another to act for him.

Dated: Signed:
-------------------------- ---------------------------------------

- --------------------------------------------------------------------------------
(Sign exactly as your name appears on
the front of this Security)

Signature Guarantee:
------------------------------------------------------------

B-12
<PAGE> 154
OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Security purchased by the
Company pursuant to Section 5.15 or Section 5.16 of the Indenture, check the
appropriate box:

Section 5.15 [ ] Section 5.16 [ ]

If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 5.15 or Section 5.16 of the
Indenture, state the amount:

Date:______________ Signature:__________________________________
(Sign exactly as your name
appears on the front of
this Security)

Signature Guarantee:_________________________________________________________

B-13
<PAGE> 155
EXHIBIT C

Form of Certificate To Be
Delivered in Connection with

Transfers to Non-QIB Accredited Investors

___________, ____

United States Trust Company
of New York
114 West 47th Street, 15th Floor
New York, New York 10036-1532

Attention: Corporate Trust Division

Re: Dominick's Finer Foods, Inc. (the "Company") 10 7/8%
Senior Subordinated Notes due 2005 (the "Securities")

Ladies and Gentlemen:

In connection with our proposed purchase of $_______ aggregate
principal amount of the Securities, we confirm that:

1. We have received a copy of the Offering Memorandum (the
"Offering Memorandum"), dated April 27, 1995, relating to the
Securities and such other information as we deem necessary in order to
make our investment decision. We acknowledge that we have read and
agreed to the matters stated in the section entitled "Transfer
Restrictions" of the Offering Memorandum.

2. We understand that any subsequent transfer of the
Securities is subject to certain restrictions and conditions set forth
in the Indenture dated as of May 4, 1995 relating to the Securities
(the "Indenture") and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Securities except in
compliance with, such restrictions and conditions and the Securities
Act of 1933, as amended (the "Securities Act").

3. We understand that the Securities have not been registered
under the Securities Act, and that the Securities may not be offered or
sold except as permitted in the following sentence. We agree, on our
own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell any Securities within three
years after the original issuance of the Securities, we will do so only
(A) to the Company or any subsidiary thereof, (B) inside the United
States in accordance with Rule 144A

C-1
<PAGE> 156
under the Securities Act to a "qualified institutional buyer" (as
defined therein), (C) inside the United States to an institutional
"accredited investor" (as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
you a signed letter substantially in the form of this letter, (D)
outside the United States in accordance with Rule 904 of Regulation S
under the Securities Act, (E) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if
available), or (F) pursuant to an effective registration statement
under the Securities Act, and we further agree to provide to any person
purchasing any of the Securities from us a notice advising such
purchaser that resales of the Securities are restricted as stated
herein.

4. We understand that, on any proposed resale of any
Securities, we will be required to furnish to you and the Company such
certification, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that
the Securities purchased by us will bear a legend to the foregoing
effect.

5. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) and have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our
investment in the Securities, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its
investment, as the case may be.

6. We are acquiring the Securities purchased by us for our own
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.

You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.

Very truly yours,

[Name of Transferee]

By:_________________________________
Authorized Signature

C-2
<PAGE> 157
EXHIBIT D

Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S

___________, ____

United States Trust Company
of New York
114 West 47th Street, 15th Floor
New York, New York 10036-1532

Attention: Corporate Trust Division

Re: Dominick's Finer Foods, Inc. (the "Company") 10 7/8%
Senior Subordinated Notes due 2005 (the "Securities")

Ladies and Gentlemen:

In connection with our proposed sale of $___________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:

(1) the offer of the Securities was not made to a person in
the United States;

(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through
the facilities of a designated off-shore securities market and neither
we nor any person acting on our behalf knows that the transaction has
been pre-arranged with a buyer in the United States;

(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable;

(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and

(5) we have advised the transferee of the transfer
restrictions applicable to the Securities.

D-1
<PAGE> 158
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.

Very truly yours,

[Name of Transferor]

By:_________________________________
Authorized Signature

D-2

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Selected Historical
and Pro Forma Financial Data" and "Experts" and to the use of our report dated
January 5, 1996 (except Note 12, as to which the date is , 1996), in
the Registration Statement (Form S-1) and related Prospectus of Dominick's
Supermarkets, Inc. for the registration of its common stock.

Chicago, Illinois

- --------------------------------------------------------------------------------

The foregoing consent is in the form that will be signed upon the completion of
the stock split prior to the effective date of the Registration Statement as
described in Note 12 to the financial statements.

/s/ Ernst & Young LLP

Chicago, Illinois

October 4, 1996